IHH Healthcare Berhad | Annual Report 2018

54 IHH Healthcare Berhad | Annual Report 2018 SUSTAINABILITY REPORT Scope Of Reporting 56 Sustainability Our Patients 58 Our People 62 Our Organisation 67 Our Environment 72 Our Community 76

INTEGRATING SUSTAINABILITY

Our vision is to build a sustainable organisation that delivers value to all our stakeholders. Underpinning our commitment towards this vision is an integrated approach to business, where sustainability is inextricably linked with all we do. This is evidenced in our reporting this year, where we have adopted the Integrated Reporting Framework demonstrating how we create value in the short, medium and long term.

55 Sustainability SUSTAINABILITY REPORT

SCOPE OF REPORTING the four main home markets, which are with regard to our sustainability In order to focus our efforts and Malaysia, Singapore, Turkey and India. performance is from 1 January 2018 strengthen our benchmarks for economic, However, for the 2018 report, we have to 31 December 2018. environmental and social sustainability, chosen specific case studies to highlight we are maintaining the scope as that of our sustainability initiatives and their financial year 2017, i.e. our operations in impact. The reporting period captured

MALAYSIA

1. Pantai Hospital Sungai Petani 6. Pantai Hospital Kuala Lumpur 11. Gleneagles Kuala Lumpur 2. Pantai Hospital Penang 7. Pantai Hospital Cheras 12. Gleneagles Penang 3. Pantai Hospital Ipoh 8. Pantai Hospital Ampang 13. Gleneagles Medini 4. Pantai Hospital Manjung 9. Pantai Hospital Batu Pahat 14. Gleneagles Kota Kinabalu 5. Pantai Hospital Klang 10. Pantai Hospital Ayer Keroh 15. International Medical University

SINGAPORE

1. Mount Elizabeth Novena Hospital 3. Mount Elizabeth Hospital 2. Parkway East Hospital 4. Gleneagles Hospital

TURKEY

1. Acibadem Adana 7. Acibadem Bursa 13. Acibadem Kocaeli 2. Acibadem Altunizade 8. Acibadem Eskisehir 14. Acibadem Kozyatagi 3. Acibadem Ankara 9. Acibadem Fulya 15. Acibadem Maslak 4. Acibadem Atakent 10. Acibadem International 16. Acibadem Taksim 5. Acibadem Bakirkoy 11. Acibadem Kadikoy 6. Acibadem Bodrum 12. Acibadem Kayseri

INDIA

1. BGS Gleneagles Global Hospitals 4. Gleneagles Global Hospitals Parel 7. Continental Hospitals (Hyderabad) Kengeri (Bengaluru) (Mumbai) 2. Gleneagles Global Hospital, 5. Aware Gleneagles Global Hospitals Richmond Road (Bengaluru) LB Nagar (Hyderabad) 3. Gleneagles Global Health City 6. Gleneagles Global Hospitals Perumbakkam (Chennai) Lakdi-Ka-Pul (Hyderabad)

56 IHH Healthcare Berhad | Annual Report 2018 Sustainability

Sustainability is becoming increasingly business operations. In order to achieve principles of Integrated Reporting. integral to long-term business success better integration, connectivity and The content index below serves as – on top of strong financial performance, completeness in our reporting, we have guide to help readers access different stakeholder groups now expect opted to include some sustainability sustainability information within organisations to adopt responsible content in other sections besides the this Annual Report. practices throughout the entire Sustainability Report, as part of the

CONTENTS OF THE PAGE SUSTAINABILITY STATEMENT CAN BE FOUND IN NUMBER

Material sustainability matters Stakeholder Engagement 30 • How they are identified • Why they are important to IHH Material Matters 34

The scope of the Sustainability Statement and basis for the scope Sustainability Report 56

Material sustainability matters Our Patients 58 • Policies to manage these sustainability matters Our People 62 • Measures and actions taken to deal with these sustainability matters which demonstrate how IHH has performed in managing Our Organisation 67 these sustainability matters Our Environment 72

Our Community 76

The governance structure in place to manage economic, environmental Sustainability Governance Report 134 and social risks and opportunities

57 Sustainability OUR PATIENTS

We promote a patient-centred culture, prioritising quality of care and patient satisfaction in order to have an impact on the well-being of our patients and their families.

QUALITY OF CARE value for our patients are best achieved key performance indicators and Our efforts to improve the quality of through having a rigorous system measurements in five strategic care to our patients involve integrating of measurement, and by using this initiatives: People, Quality, Service, practices that are patient-centred, information to make continuous Finance and Growth. including the improvement of time improvements. For instance, in 2007, spent and communication with patients. the Parkway Pantai hospitals in Malaysia and Singapore embarked on the All of our hospitals strongly believe that Enterprise Balanced Scorecard project. clinical excellence and the creation of This Balanced Scorecard identifies

58 IHH Healthcare Berhad | Annual Report 2018 Sustainability

INDIA: CASE STUDY

In order to achieve the aforementioned Value-added care towards improving the well-being of patients involves targets, Parkway Pantai India’s action implementing lean management where we are constantly improving the quality plan involves going lean and adopting of time spent in patient care. Nurse staffing ratios and patient maximums are a practices that reduce wasted time spent question of care quality, and we make sure that each patient is given enough by healthcare providers and improve the attention by assigning a number of administrators accordingly. In determining the quality of time spent in patient care. staffing ratio, we have also taken into consideration the fact that patient safety and Some of the key considerations that are care quality would be compromised if the nurses take on too many patients. The underway or in the planning stage are table below list the staffing ratio per patient at the different wards and units in the listed below: hospitals in India. STAFFING RATIOS PER PATIENT • Transforming the Nurse Call Bell System to a Patient Request-Specific Specific Unit Current Practice Call Bell System to reduce time General Ward 1:6 wasted on receiving calls for Special General Ward 1:5 non-nursing activities Sharing Ward 1:5 • Installing a special software Private Ward 1:4 application for instant complaints, and rectification of the same to Super Deluxe Ward 1:3 reduce the number of nurse call bells High Dependency Unit/ Step Down ICU 1:3 – a pilot study has been implemented Post-Operative Liver, Heart & Lung in Ward 1:1 in Continental Hospitals Bone Marrow Transplant Unit 1:1 • Designating a dedicated nurse for handling billing, pharmacy and Transplant ICU (Others) 1:1 patient care coordination activities Transplant ICU (Liver, Heart & Lung) — Ventilated 2:1 • Reducing the number of pharmacy ICU — Non-Ventilated 1:2 sub-stores managed by nurses • Reviewing the existing system of documentation and simplifying it with The average time spent, i.e. the current time and target time, in Parkway Pantai less writing requirements, but in hospitals in India for direct nursing care with patients on a six-hour shift in the wards keeping with Joint Commission and ICUs is as follows: International (JCI) requirements. WARDS ICUs Another measure that helps reduce wasted time in ad-hoc management, and Target Target provides a method by which healthcare providers can reliably deliver the best 200/360 250/360 possible care for patients undergoing minutes minutes particular treatments with inherent risks, is the use of infection control bundles in ICUs. The use of bundles is a set of evidence-based practices, generally Current Current three to five, that when performed collectively and reliably, have been 136/360 190/360 proven to improve patient outcomes. minutes minutes Another key aspect of quality care is patient and family engagement. At Parkway Pantai India, engagement has Wasted time, energy, and material are pervasive in healthcare. From a study conducted increased through our efforts to provide on Parkway Pantai India, it was observed that the majority of a nurse’s time during a patients with education or counselling on shift is spent on indirect nursing care, housekeeping activities, such as documentation medication safety, prevention of patient and billing related activities, patient care coordination with other treating teams, and falls, pain management, consents and pharmacy-related activities. discharge information.

59 Sustainability OUR PATIENTS

PATIENT AND FAMILY SAFETY to cater to the needs of our hospital staff, data, diagnosis, anthropometric The safety of our patients and their patients’ families and other visitors. measurements, weight history, pertinent families is of paramount importance as medications, diet order, nutritional Dietitians create food menus for patients needs, appropriateness of diet order, it has a direct impact on our business. and their companions according to Key aspects of patient and family safety assessment of nutritional status and the daily and weekly nutritional recommendations/nutrition goals. that are also pertinent in ensuring requirements by a value calculation of sustainable healthcare are food quality carbohydrate, protein, fat, vitamins and In terms of food handling, our food and the rational use of medicine. Our minerals. All products are ensured to be products are prepared in a clean kitchen efforts to implement checks and of the highest quality and compatible in where all staff working in the cooking measures throughout our operations terms of food safety and nutritional and preparation lines are required to be are elaborated in this section. value as monitored by our nutrition and equipped with appropriate personal dietetics professionals. protective equipment (PPE), such as PATIENT MENU hairnets, disposable/cloth aprons, safe At IHH, we care about the quality and Nutrition screening is carried out for all closed-toe shoes, masks and gloves with nutritional benefits of our food products in-patients within 24 hours of admission, no hand jewellery or watches. Food is that are served to our patients. Our and a nutrition assessment is completed delivered to patients in our exclusive approach to food quality is to provide on patients who are identified to have a trolleys to maintain the hot or cold food that is sustainable, locally-focused, moderate or severe nutritional risk. A temperature of the meal, and a colour- clean, safe and specific to each of our clinical dietitian initiates a calorie count coded system is used to label the patients’ nutritional needs. Aside from where the results are documented in the different dietary requirements of patients hospital patients, the comprehensive progress notes as a diet prescription. The in order to avoid confusion. food menu prepared by our in-house and nutrition assessment and plan of care will external food and beverages team is able include a chart review of laboratory

SINGAPORE: CASE STUDY

When designing menus for patients, dedicated to providing for the dietary a control measure, we conduct Parkway Pantai hospitals in Singapore needs of our patients. They share their frequent visits to the vendor and put the trust in our reliable dietitian knowledge and work alongside the F&B prepare audits when necessary. guidelines for healthy product team to supply therapeutic diets1, such as selections and chemical-free food texture-modified diets2, to patients with In our product kitchen, we conduct products. We never fail to consider and special dietary needs. Also, to ensure daily hygiene checks, audits (three prioritise our patients’ health conditions the patients’ dietary requirements are times a week), monthly food product and their nutritional requirements. labelled and categorised, we have in testing by a third-party lab and place a food labelling system. quarterly quality Maintenance Our F&B management team works Department audits to ensure that the together with our dietitians to deliver Parkway Pantai conducts a series of food we provide to our patients are the best meals for our patients. All of prerequisites to source for the best food safe and of the highest quality to foster our food handling and production staff supplier. Firstly, we support local food health. are trained in food safety and hygiene suppliers that are Hazard Analysis Critical and are certified by the National Control Points (HACCP3) or ISO certified Environment Agency (NEA), a local and examine their supply chains before government agency. Our in-house awarding them the contract. Secondly, dietitians are very experienced and are as a means of quality assurance and as

1. A therapeutic diet is a meal plan that controls the intake of certain foods or nutrients. It is part of the treatment of a medical condition and is normally prescribed by a physician and planned by a dietitian. A therapeutic diet is usually a modification of a regular diet. 2. A texture-modified diet is a type of therapeutic diet designed to make chewing and swallowing safer and easier. 3. The HACCP scheme meets the requirements of the Codex Alimentarius Commission – established by the World Health Organization and the Food and Agriculture Organization of the United Nations to bring together international food standards, guidelines and codes of practice to ensure fair trade.

60 IHH Healthcare Berhad | Annual Report 2018 Sustainability

RATIONAL USE OF MEDICINES The inapt use of medicines results in not efficacy. The Group also regulates The Ministry of Health (MOH) in Malaysia only reduced safety and quality of improper patient adherence to dosing published the National Survey on the Use healthcare but also the increased schedules and treatment regimens of Medicines (NSUM) in 2016 and it stated wastage of health resources. The Group and inappropriate self-medication. that 60 per cent of medicines in public has a systematic approach to ensure the The checks and measures towards health facilities and 70 per cent of rational use of medicines, which includes these practices are in place throughout medicines in private facilities were proper dispensing practices, adherence our operations. prescribed and sold inappropriately in to protocol for prescribing medicine and developing countries. consideration for cost-effectiveness and

SINGAPORE: CASE STUDY

Multidisciplinary committees have been order entry (CPOE) reduces prescription pharmacist is continuously available to set up to coordinate policies and errors at the point of care, and provide medication information monitor the use of medicines in medications are prescribed using the services to doctors, nurses and Parkway Pantai hospitals in Singapore: hospital’s electronic health records (EHR). patients. The CPOE system uses a clinical decision • Medical Advisory Board support database that allows checking Anti-microbial resistance has been • Medical Quality Assurance for any drug-drug cross allergy and recognised as a global health threat Committee drug-drug interaction(s). and is now on the political agenda with organisations such as the World Health • Therapeutics and Infection Control A pharmacist will verify the prescribed Organization (WHO), which recognises Committee (TICC) medications for the appropriateness the necessity to act to preserve the • Pharmacy and Therapeutic of the drug, dosage regimen, route potency of antimicrobial agents and Committee of administration, drug interactions, invest funds to discover new ones. therapeutic duplication and potential The Antibiotic Stewardship Programme Our professional healthcare cross allergy. (ASP) in our hospitals seeks to enforce administrators ensure patients are judicious antimicrobial prescription to protected from adverse drug events For medication administration, the nurse improve individual patient care and and harm from medications. One utilises knowledge-based medication reduce microbial resistance. Treatment process that we have implemented administration (KBMA) where he/she guidelines for antimicrobial use are is medication reconciliation. Upon scans the patient tag and medication developed to optimise its use and admission, a pharmacist will perform barcode to ensure that the right minimise any resulting side-effects. medication reconciliation where medication is given to the right patient, Furthermore, the Pharmacy Division prescribed medications are reconciled at the right dose, right frequency and tracks the usage of antibiotics, such as with the patient’s own medications right time. Furthermore, a pharmacist Carbapenems2 and Vancomycin3, and taken prior to admission with the will provide counselling on the proper reports this to the TICC. purpose of looking out for duplication, use of medications to the patient, omission or an unintentional change in including specialised medications such the dosage or dosage regimen. as anticoagulants1 and medications requiring devices for delivery, such as The backbone of Parkway Pantai’s inhalers, injections and sprays. Yet approach to ensure the rational use of another measure to ensure proper drug medicines is the electronic order usage is that our pharmacies operate system. Computerised prescription 24 hours – whereby at least one

1. Anticoagulants are medications that thin the blood. 2. Carbapenems are antibiotics used for the treatment of infections known, or suspected, to be caused by multidrug-resistant bacteria. 3. Vancomycin is an antibiotic used to treat a number of bacterial infections. The World Health Organization’s List of Essential Medicines features the most effective and safe medicines needed in a health system, and Vancomycin is on the list.

61 Sustainability OUR PEOPLE

To provide a safe working environment that is conducive for the personal and professional growth of our employees and corporate culture that is built on good communication practices, transparency and integrity.

We have a diverse group of people IHH’s Workforce Diversity Policy, Gender conducive workplace by facilitating working in IHH across the four countries. Diversity Policy and Boardroom Diversity effective communication and clear The following figures demonstrate Policy allow for an open workplace that channels for feedback. Moreover, our the distribution of our employees by nurtures diversity and inclusiveness. employees are continuously exposed to gender, age and employment level. We are able to create a positive and new cultures, ideas and knowledge.

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The graphs below describe the total employee strength and the distribution of full-time employees by gender across the main home markets – Malaysia, Singapore, Turkey and India. S S ale emale

MALAYSIA

IMU

SINGAPORE TURKEY

INDIA MALAYSIA IMU SINGAPORE TURKEY INDIA

Employee distribution from 1 January 2018 to 31 July 2018

The graphs below capture the distribution of employees by age and employment category across the four home markets from 1 January 2018 to 31 July 2018. S xecutie onxecutie enio anagement xecutie onxecutie enio anagement

Below 30 yrs 30-50 yrs Above 50 Years Below 30 yrs 30-50 yrs Above 50 Years

S xecutie onxecutie enio anagement xecutie onxecutie enio anagement

Below 30 yrs 30-50 yrs Above 50 Years Below 30 yrs 30-50 yrs Above 50 Years

xecutie onxecutie enio anagement

Below 30 yrs 30-50 yrs Above 50 Years 63 Sustainability OUR PEOPLE

EMPLOYEE HEALTH occupational health-related incidents, gained through experience and ongoing AND SAFETY infection-related incidents and exposure instruction and advice for staff and At IHH, we believe in creating a strong to bodily fluids. Our safety mechanism management. Our hospitals in the safety culture. The Group reports on also entails the submission of health different home markets appoint key employee incidents and identifies trends and safety recommendations about personnel and committees to promote and key risk areas, such as employee workplace conditions, the continual and execute workplace health and injuries, needle-stick injuries, employee improvement of occupational health and safety measures. falls, employee mobility incidents, safety standards by applying the lessons

TURKEY: CASE STUDY

According to the Turkey Labour Law Committee Worker Act No. 6331, firms employing 50 or Acıbadem Hospitals Members Representatives more workers (with job durations of Kadikoy (ACB) 24 4 more than 6 months) are obligated to Kozyatagi (KOZ) 16 4 establish a committee responsible for occupational health and safety activities. Fulya (FUL) 18 4 Acıbadem Healthcare Group has Maslak (MAS) 17 5 appointed 298 committee members Bakirkoy (BAK) 13 4 to the Occupational Health and Safety International (INT) 20 3 (OHS) Board to oversee the 16 hospitals. Taksim (TKS) 13 3 Each OHS committee consists of the Kayseri (KAY) 18 4 following people: Bursa (BUR) 19 5 Kocaeli (KOC) 14 3 1. Employer or representative of the Eskisehir (ESK) 26 3 employer Bodrum (BOD) 14 6 2. Occupational Safety Specialist Adana (ADA) 20 3 3. Occupational Physician Ankara (ANK) 16 3 4. Representative from Human Atakent (ATAK) 21 5 Resources Altunizade (ATZ) 29 8 5. Civil defense expert, if applicable 6. Foreman, workman or chief workman, if it exists Acıbadem has a policy on OHS to With regard to workplace incidents, 7. Worker representatives increase awareness and to ensure there were no occupational fatalities that the management of OHS activities is at Acıbadem in financial year 2018. 22 per cent of the total strength of the in accordance with the legal regulations, Four out of the 16 hospitals recorded OHS committees across all 16 hospitals as well as national and international less than 10 incidents in the first half consists of worker representatives. The standards. This policy involves standard of 2018 with Acıbadem Kocaeli having table opposite represents the number controls, higher risk environment zero incidents. The following graph of worker representatives and the total controls, and other controls to protect represents the number of workplace number of committee members for workers from incidents and occupational incidents/injuries that occurred on a each hospital, which complies with the diseases. This is in addition to job entry monthly basis across the 16 hospitals. requirements given by the Declaration and periodic examinations and risk on the Qualifications, Rules and assessments. OHS Committees meet Procedures for the Designation periodically depending on the risk class of Worker Representatives for of the workplace. As hospitals are Occupational Health and Safety. considered high risk, the committees meet on a monthly basis.

64 IHH Healthcare Berhad | Annual Report 2018 Sustainability

S SS anua eua ac pil a une ul

KAY MAS BOD ACB ATAK KOZ BAK BUR INT TKS ANK ESK ATZ FUL ADA KOC

TRAINING AND DEVELOPMENT performing individuals and empower programmes ensure that all our IHH’s development and reputation in them through leadership programmes healthcare professionals are regularly the healthcare industry wholly rely on that will help bring their career forward. updated, trained and developed in order for them to achieve their personal and the dedication, skills and knowledge There are ongoing training programmes of our workforce. Various training and professional goals, and so that they can across IHH’s home markets that cater to deliver the best quality care. development programmes are offered the different skill requirements and to our employees at every employment training needs of our staff. These level. We frequently assess high-

SINGAPORE: CASE STUDY

In Singapore, the learning and development approach for employees focuses on three areas.

1 2 3

CORPORATE ATTACHMENT, UNDERSTANDING PROFESSIONAL TRAINING, STRETCHED ASSIGNMENTS LEADERSHIP STYLES CONFERENCES, WORKSHOPS AND ON-THE-JOB STINTS AND COACHING AND SEMINARS

Training is given both in-house and through third-party coaching for clinical staff (physicians and nurses) and non-clinical staff (pharmaceutical representatives, biomedical technicians and HR).

65 Sustainability OUR PEOPLE

The table below illustrates the total amount of training hours and placements undertaken for the clinical and non-clinical hospital staff from January to June 2018.

Training Placements Training Hours Total Training Non- Total Staff Non- Placements Clinical Clinical Training Clinical Clinical Training Programmes Attended Staff Staff Hours Staff Staff

Management and Supervisory Skills, Productivity and Quality-Related Skills, IT Systems 2,627 1,833 794 30,568 20,130 10,438 Academic Qualification and Sponsorship 14,328 14,328 – 18 18 – Professional Certification (e.g. AED1, BCLS2) 678 668 10 4,850 4,806 44 Workshops, Overseas Seminars and Conferences 2,215 1,482 733 24,592 15,142 9,450

1. Automated External Defibrillator, a device used to resuscitate patients after CPR has proved ineffective. 2. Basic Cardiac Life Support.

Performance appraisal is an important Management cycle is held formally to In addition to the formal reviews, step in the career development of our review the employee’s performance informal check-ins take place employees. It is also very beneficial for and contribution for the year. It is a frequently throughout the year to both employees and management to conversation to understand the discuss and manage performance understand the individual’s current employer-employee expectation, the progress and expectations. performance level, challenges, training employees’ aspirations and how the needs and areas for improvement. In business can support employees in their Singapore, the annual Performance work and career growth opportunities.

66 IHH Healthcare Berhad | Annual Report 2018 OUR ORGANISATION

To strengthen our international market presence without compromising aspects of quality and sustainability, and to be responsive to the challenges and changing expectations of stakeholders within the healthcare industry.

INTERNATIONAL HEALTHCARE agencies. We continuously aspire to distributed among all stakeholders, SERVICES create an inclusive, comfortable and generating stable employment IHH’s international healthcare services pleasant environment for our patients opportunities and maintaining the play an increasingly important role in where their needs are always conveyed socio-cultural authenticity of host building market presence in the home and received accurately. communities. Moreover, by serving the markets of Malaysia, Singapore, Turkey higher demands and diverse needs of The economic and social impact of international patients, we are able to and India. Our efforts in catering to building our international healthcare international patients include building continuously improve healthcare quality services include ensuring long-term and expertise. infrastructure, medical expertise, ancillary economic opportunities in which services and collaborations with travel socio-economic benefits are equally

67 Sustainability OUR ORGANISATION

MALAYSIA: CASE STUDY

In Malaysia, the international healthcare In 2017, we experienced a 13 per cent international patients and revenue services mainly attract patients from increase in the number of international generated. The increase in the first Indonesia, Singapore, the Middle East, patients from 2016, amounting to 67,689 half of 2018 is illustrated below: Bangladesh and Indo-China. To patients. Consequently, the total revenue facilitate communication between staff contribution from international healthcare and international patients, we have services in 2017 was RM 77.4 million, multilingual employees who are fluent which was a four per cent increase from in Bahasa Indonesia, Japanese, Korean that of 2016. We have seen a year- and Mandarin. on-year increase in the number of

INTERNATIONAL PATIENTS REVENUE GENERATED 2017 (JAN–JUN) 2018 (JAN–JUN) 20182017 (JAN–JUN)(JAN - JUN) 20172018 (JAN(JAN–JUN) - JUN) 33,591 40,309 40,309RM 43.6 33,591RM 45.8 million million

20% increase 5% increase

The pull factors for international patients to choose Parkway Pantai hospitals in Malaysia are:

1 2 3

TRACK RECORD, HIGHLY SUB-SPECIALISTS INTERNATIONAL SKILLED AND OVERSEAS- ACCREDITATION TRAINED DOCTORS

4 5 6

LATEST EQUIPMENT AND SEAMLESS PATIENT SERVICES AFFORDABILITY TECHNOLOGY (E.G. AIRPORT TRANSFERS, HOTEL BOOKINGS, CONCIERGE)

7 8 9

REPUTABLE BRANDING WELL-QUALIFIED NURSES HIGH RECOMMENDATION FROM PREVIOUS PATIENTS

STRATEGIC LOCATION AND EASY ACCESS

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The different organisational bodies In 2018, our efforts to expand the scope Our outstanding international Parkway Pantai has partnered with to of international healthcare services healthcare services achieved foster international healthcare services included collaborating with international recognition from the International include independent agents, foreign insurance and TPAs for the purpose of Medical Travel Journal at the 2018 doctors, banks, associations, providing cashless services, which make Medical Travel Awards. At these community clubs, travel agents, it easier for international patients. We Awards, Gleneagles Kuala Lumpur was insurance and third-party administrators have also begun to collaborate with local awarded the "International Hospital of (TPA). Our international health services banks for the purpose of providing the Year", "Best Marketing Initiative" help generate income and employment additional services and privileges to and Highly Commended in the opportunities within sectors, such as attract each bank’s customers. We also ‘Excellence in Customer Service’ travel and tourism, transportation and organise joint events with insurance category. medical tourism related departments agencies to create better awareness such as Malaysia Healthcare Travel amongst policy holders, and are growing Council (MHTC) within MOH. our efforts in digital marketing as well as on social media platforms like Facebook.

COST-EFFECTIVENESS compared to alternatives. At IHH, we take every precaution in assessing Cost-effectiveness is an increasingly we recognise the benefits of the risks involved before considering important consideration in the healthcare cost-effectiveness in minimising cost-effective alternatives. Ultimately, industry. It defines the extent to which administration and improving quality, we are accountable to our patients, and healthcare operations have achieved, or accountability and accessibility to we prioritise the maintenance of high are expected to achieve, at a lower cost healthcare and its relevance in the standard of patient health and safety. context of sustainability. However,

INDIA: CASE STUDY

In each of the home markets, there are methodology to improve clear consideration in this aspect to ongoing as well as prospective plans communication and coordination optimise internal support services for cost-effectiveness. The table below within the process or system. and processes by using predictive and captures the initiatives undertaken by responsive platforms that are efficient, Parkway Pantai hospitals in India. As we explore ways of getting better automated and move in real time. Initiating cost-effectiveness in areas value in healthcare, the trend is to shift Parkway Pantai is looking into such as procurement, pharmaceutical care from the most expensive inpatient technological intervention to achieve processes and hospital operation settings to providing care in ways that cost-effectiveness in manpower. structures involves standardisation and reduce spending while improving consolidation, and implementing a lean outcomes. Technology is a key

Target Areas Current Status Reduction Target Initiatives towards Cost-Effectiveness

Material Cost Current Material cost at 20.8% 19% • Central procurement • Formulary implementation and efficient usage • Price negotiation • Brand substitution • Vendor consolidation

69 Sustainability OUR ORGANISATION

Target Areas Current Status Reduction Target Initiatives towards Cost-Effectiveness

Doctor Cost Current Doctor cost at 25.7% 24% • Initiating innovative engagement models

Manpower Cost Current Manpower cost at 20.4% 19% • Rationalising manpower cost in each hospital • Standardising hospital operations structures • Technology implementation

EMERGENCY PREPAREDNESS Management Committee, a Disaster and dangerous pathogens are detailed in Emergency preparedness in a healthcare Management Plan and drills/exercises/ the laboratory associated infections and facility requires extensive planning, training are made available at all IHH biosafety guidelines. Safety training is an documentation and communication. hospitals to improve the unit’s readiness essential part of preparing laboratory and An effective response from all hospital and to ensure the safety of staff, patients other staff for managing such outbreaks, employees is required during an and visitors while managing an and these training sessions are emergency, and towards this, we have emergency situation. conducted on a regular basis. in place the necessary emergency plans In Malaysia, Singapore, Turkey and India, and procedures. An Emergency the requirements for effective response Response Team (ERT) or Disaster to contain any outbreaks of emerging

MALAYSIA: CASE STUDY

As part of a Laboratory Readiness and containment of outbreaks. The outcome Infection Prevention and Control Response Plan for the rapid detection from the meeting is updated to all Nurse or any person authorised by the and containment of outbreaks of relevant personnel in Parkway Pantai. hospital will subsequently inform the emerging and dangerous pathogens, Occupational Health Unit of the MOH. Parkway Pantai hospitals in Malaysia In the event of a suspected outbreak or ensure manpower is well trained and incident, the Manager or Person-in- Should an outbreak be confined to an up to date with emergency procedures. Charge of the laboratory is required to individual site, the Hospital Infection The necessary equipment and reagent contact the Infection Prevention and Prevention and Control Nurse will supply are identified and prepared. Control Nurse of his or her hospital, even manage the outbreak by liaising with Communication and engagement if the situation is unclear. The Infection the appropriate clinicians. Depending with relevant authorities, such as the Prevention and Control Nurse will assess on the situation, the Hospital Infection Institute for Medical Research (IMR), the situation and will inform the Hospital Prevention and Control Nurse Team Center for Disease Control and Management and Head of Infection will initiate appropriate infection Prevention (CDC) and the Ministry Prevention and Control and update control procedures. of Health (MOH), are established to them on the developments that occur come up with a flow and plan for the throughout. If necessary, the Head of

INFECTION CONTROL PROCEDURES

Isolation Case Finding Data Collection

Diagnostic And Screening Microbiological Tests

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Where possible, specimens should International Medical University materials, emergency response and be collected immediately and sent (IMU) contacts to facilitate coordination. for diagnostic and microbiological The IMU Research Lab Disaster screening tests before control The chemical spill procedure outlines Management Plan (DMP) was established measures are introduced. If the the general requirements for the to outline the policies and procedures of disease is notifiable by law, the management of chemical spills on the any large-scale emergency or disaster. medical staff responsible for the IMU-RL to minimise effects to the This plan will be implemented to ensure patient and the Safety and Health health and safety of individuals from the maximum and efficient utilisation Officer must notify the MOH and exposure to chemical spills and to of resources during an emergency Department of Occupational Safety reduce the impact on the environment. event/disaster. and Health Malaysia (DOSH). In the event of a chemical spill, the individual who causes the spill is The IMU Research Laboratory (IMU-RL) If the outbreak is not limited to an responsible for prompt and proper strives to provide a safe environment to individual site, the infection control clean up. Related authorities, such as facilitate and support research activities. procedures undertaken by the the IMU-RL office (and/or IMU Safety The DMP will use IMU-RL and outside Manager/Person-in-Charge are as and Health Organisation and medical resources to: follows: assistance), should be informed 1. Protect the safety and life of immediately. 1. Control measures: IMU-RL students, faculty, staff (a) Antibody Therapy/prophylaxis and visitors; (b) Immunisation 2. Protect and stabilise research, (c) Staff Screening teaching and learning activities; (d) Decontamination of Laboratory 3. Minimise damage and the cost to or equipment facilities and material resources (e) Personal Protective Equipment on IMU Bukit Jalil campus; (PPE) 4. Provide for the continuity of facility management, damage assessment 2. Assessing the outbreak at regular and re-establish IMU-RL’s normal intervals operations. 3. Liaising with Hospital Support Services The DMP provides guidelines, procedures and information necessary 4. Giving infection control advice to to recover from an emergency event staff to limit a potential spread or a disaster. This is used for planning 5. Increasing staff awareness of the and executing through a priority list for organism involved, mode of damage control and prevention. The top transmission and rationale for priorities are human life and health and control measures being taken safety, followed by hazardous materials 6. Involving a DOSH Certified and chemical containment, experimental Occupational Health Doctor (OHD) animals, infrastructure and resources, as for reassurance and support well as document preservation. The DMP 7. Preparing reports to disseminate also outlines a disaster responsibility information and findings chain, a list of emergency supplies and

71 Sustainability OUR ENVIRONMENT

To strengthen our commitment to manage our impact on the environment by prioritising strict adherence to environmental regulations governing waste and by improving our energy performance.

WASTE MANAGEMENT IHH prioritises the management of by the hospitals in the surrounding According to the World Health healthcare waste, and the hospitals have environment. In Malaysia, Singapore, Organization, about 85 per cent of developed strategies and systems along Turkey and India, hospitals are the total amount of waste generated with strong oversight and regulation to expected to follow environmental by healthcare activities is general, incrementally improve waste segregation, regulations as enacted by national or non-hazardous waste, comparable to destruction and disposal practices. This regional law. This compliance is also domestic waste. The remaining 15 per is done with the ultimate aim of meeting important to maintain accreditations, cent is considered hazardous material national and international standards. such as Joint Commission International accreditation. that may be infectious, chemical or Much of the concern around radioactive. The treatment and disposal environmental compliance in healthcare, of healthcare waste may pose health which has been reiterated by the Basel risks indirectly through the release of Convention1, is regarding the impact of pathogens and toxic pollutants into hazardous or scheduled waste generated the environment.

1. The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal is an international treaty aiming to protect human health and the environment against the adverse effects of hazardous wastes.

72 IHH Healthcare Berhad | Annual Report 2018 Sustainability

TURKEY: CASE STUDY

In Turkey, hospitals are required • Provincial Directorate of Environment project, which started at the end of to comply with the following connected to the Ministry of May, the types of wastes produced in environmental regulations: Environment the hospitals and their appropriate • Provincial Directorate of Health separation were studied. Medical • Environmental Permits and Licenses connected to the Ministry of Health wastes were labelled with the name of Regulation the units they were produced in and • Ministry of Transportation Regional • Environmental Impact Assessment were investigated separately. Periodic Directorates Regulation site audits were performed to avoid • Waste Management Regulation Waste generated from the various disposing non-infectious waste into medical waste containers. The amount • Medical Wastes Control Regulation operations of Acibadem hospitals are classified under three main types – of medical waste was controlled at all • Vegetable Oil Wastes Control hazardous, infectious and non-hazardous times but, when a sudden increase Regulation waste. Based on the total waste that was occured, we investigated the cause • Packaging Wastes Control generated by Acibadem hospitals from and immediately implemented Regulation January to July 2018, the figure below mitigation measures. As a result of • Oil Wastes Control Regulation represents the percentage breakdown these efforts, we saw a 20 per cent reduction in medical waste in June • Regulation on Highway of the three categories of waste. 2018, compared to that of May. The Transportation of Hazardous In Acıbadem’s waste management medical waste generated by the Substances policy, reducing waste is a priority. hospitals reduced from 217.6 tonnes in • Waste Batteries and Accumulators As part of the medical waste reduction May to 174.7 tonnes in June. Control Regulation • Environmental Noise Assessment and Management Regulation S • Water Pollution Control Regulation onaadous aste nectious aste aadous aste • Regulation on Control of Air Pollution Caused by Heat • Regulation on Control of Air Pollution Caused by Industry

The audits conducted by the official authorities listed below on Acibadem hospitals in 2018 showed that there was no case of non-compliance regarding waste management or other environmental permits and, as a result, no penalties were imposed.

The table below describes the different disposal methods and the amount of waste generated by Acibadem hospitals, medical centres and other facilities from January to July 2018.

Amount of Waste Type of Waste (Tonnes) Description Disposal Method

Non-hazardous 2,203.0 Domestic Waste Domestic waste is collected by the municipality to Waste be taken to domestic waste collection centres. Packaging Waste Paper, cardboard, plastic, glass and metal packaging wastes are collected by licensed recycling companies which are contracted by the municipality to be processed for recycling.

73 Sustainability OUR ENVIRONMENT

Amount of Type of Waste Waste (Tonnes) Description Disposal Method

Hazardous Waste 282.6 Battery Waste Delivered to the Portable Battery Producers and Exporters Association.

Accumulator Waste Delivered to related licensed companies regarding their contents.

Electronic Waste Delivered to licensed companies that separate the recyclable parts and apply necessary processes for recycling.

Cytotoxic Waste Delivered to licensed companies for disposal by Pharmaceutical Waste incineration. Laboratory Liquid Waste Contaminated Packaging Waste Autoclave Waste Fluorescent Lamp Waste Absorbent materials contaminated with hazardous substances Paint Waste Anti-freeze Waste Grease Filters Waste

Mineral Oil Waste Delivered to licensed companies for recycling. Vegetable Oil Waste

Infectious Waste 1,546.7 Medical Waste Delivered to the city’s licensed company to be sent to sterilisation or incineration facilities.

ENERGY EFFICIENCY among others, the capacity of the Across the different home markets, we IHH hospitals are increasingly becoming building, the need for them to function have taken active measures to improve a global destination for medical and 24 hours a day throughout the year and the energy efficiency of our hospitals patient care, and there is a corresponding the careful control of the internal climate. and buildings, including but not limited growth of infrastructure to support the In practice, energy efficiency is salient to to using state-of-the-art technology, industry, which inevitably results in an our efforts to strengthen the performance switching to LED lighting, upgrading increase in energy consumption. The of our hospitals in the context of heating, ventilation and air-conditioning scope of introducing energy efficiency environmental sustainability. However, (HVAC) systems, renewing high energy in a hospital involves creating a robust medical considerations remain the top consuming equipment and optimising energy-saving programme that factors in, priority. operational system controls.

74 IHH Healthcare Berhad | Annual Report 2018 Sustainability

MALAYSIA: CASE STUDY

In Malaysia, all 14 hospitals have been practising a range of energy saving S S practices in areas including the front office, management office, IT office, facility room, housekeeping station, ward, nursery, accident and emergency department (A&E), operating theatre, intensive care unit (ICU) and the central sterile services department (CSSD), as well as using modality equipment for

imaging and health screening. Without KWH/CENSUS compromising the safety and security of our patients and staff, we have been successfully practising the following:

• Switching off televisions, computers Jan Feb Mar Apr May Jun Jul Aug Sept and room lights when not in use. • Turning off air-conditioning in consumption and cost per year when The total electricity consumption empty patient rooms and, where comparing the chiller efficiency (kW/RT1) from January to September 2018 was possible, after office hours. of one new chiller unit to an old five per cent higher compared to that • Switching off modality machines, chiller unit are 193,093.7 kWh and of 2017. The increase was attributed to except the General X-Ray machine, RM 55,944.65 respectively. the opening of Gleneagles Kuala when not in use. Lumpur (Block B) in 2018, which Monitoring and tracking energy accounted for four per cent of the 2018 • Creating awareness amongst staff consumption is the first step in controlling consumption and the 17 per cent on Energy Saving Management. and conserving energy in the hospital increase in the 2018 patient census. buildings. Recording the data on a Our initiatives include upgrading or monthly basis has helped to identify replacing HVAC and chillers. energy saving opportunities and has S In 2018, the existing HVAC of Pantai provided an estimate on how much S Hospital Penang and Pantai Hospital energy each opportunity can save. ( x ) Ampang was upgraded and fine-tuned for considerable energy As a result of our energy saving and CO2 savings, reduced costs initiatives, we saw a 10 per cent and improvements to the working reduction in energy intensity from environment. Also, within the reporting January to September 2018, when period, two chillers in Gleneagles compared to 2017. The energy Kuala Lumpur (Block A) and three in intensity of our operations is a better Gleneagles Penang (Block B) were representation of the energy consumed replaced with newer, efficient chillers. as it is relative to the patient census. The prospective savings in electricity

2018 2017 1. Chiller Efficiency = Chiller compressor power consumption (kW)/Refrigeration tonnage (RT)

75 Sustainability OUR COMMUNITY

To provide resources and skills to improve the health and well-being of vulnerable sections of the community.

We are aware of our corporate social transparency to the IHH community. Singapore, Turkey and India are carried responsibility to the larger community Setting a strong culture for social out with the aim of improving access to and the vulnerable sections of society. responsibility within IHH sets the tone for healthcare facilities, increasing public However, we believe that corporate our CSR efforts to the wider community healthcare awareness, nurturing the social responsibility begins at home, and of people in the countries we operate in. next generation of healthcare that is the IHH community. professionals, funding community COMMUNITY DEVELOPMENT projects and providing disaster relief. Good hospital governance and protecting Focusing on community engagement We target the vulnerable sections of the interests and rights of our doctors, has become important for global public society in order to build their resilience nurses and employees is our absolute health as countries face complex health and improve health awareness. We priority. IHH’s code of ethics and conduct, challenges that stretch and test the recognise that people are at the centre fair grievance procedures and capacity and resilience of health systems of any effort to create better health and transparency in communicating the and the populations they serve. that resilient people are the foundation of processes and rationale adopted by resilient health systems and communities. management and internal controls reflect Our community engagement and our commitment to fairness, integrity and outreach programmes in Malaysia,

76 IHH Healthcare Berhad | Annual Report 2018 Sustainability

IMU: CASE STUDY

IMU’s ongoing community service medication counselling and nutritional on four key areas, namely healthcare, programme, IMU Cares, which is assessment to prevent diseases, and education, the environment and undertaken by its staff and students, educating and training caregivers. humanitarian aid. In 2018, serves the community by delivering The IMU Cares office has a system in IMU spent a total of RM 31,077 for healthcare services. These include place for project leaders to identify the activities and programmes promoting health and wellness, and research the needs of the that were carried out under the providing holistic care, including underprivileged community, focusing IMU Cares Project.

Project Name Beneficiary Activity

Health Screening for the Beautiful Gate Foundation Blood glucose and blood pressure monitoring, dental physically challenged and for the Disabled check-up and over-the-counter medication education. those in need of support

Jewellery Making Workshop Caring and Community Taught adolescent girls living and social skills, in Centre – underprivileged particular, jewellery making. urban families in Kapar, Klang Recycling of Hotel Toiletries Recycling.

Discover the Joy of Residents of Rumah Charis Basic English skills for the children. Learning 3.0 (Home for the Children)

Diabetes and Health Residents of Rumah Charis Diabetes and medication education. Education for Elderly (Home for the Aged) Residents

Health Talks Health talks on the importance and advantages of exercise.

Health Education and Residents of Kampung Tekir Personal hygiene education, medical screening, Screening dental screening, home visits, follow-up consultations and treatment.

Residents of Kampung Sebir Health talks on family planning, air pollution, respiratory health, personal hygiene, skin care, health screening follow-up and home visits.

Kampung Sebir Education Students of Kampung Sebir Taught students English and Mathematics according to Project their level of proficiency. Younger children were taught the alphabet, encouraged to draw and colour, and engaged in one-to-one reading exercises.

Health, Safety and English ROH Community School Seremban Taught students English conversational skills, fire Workshops safety training, and conducted medical screening.

Chemistry and Biology Dignity for Children Foundation Gave students hands-on experience in biology, with Practical Sessions the observation of animal and plant cells, DNA and digestion, and chemical practical sessions.

Chinese Medicine Service Balai Masyarakat Seri Kembangan Chinese medicine health screening and treatment. for the Community (general public)

77 Sustainability OUR COMMUNITY

IMU: CASE STUDY

Project Name Beneficiary Activity

Diabetes Education and Residents of Rumah Victory Elderly Healthcare education on diabetes and personal Personal Hygiene for Home hygiene. Elderly Residents Train the Trainers Caring for Conducted Activities of Daily Living (ADL) lessons for the Elderly caregivers, focusing on wound dressing, hand washing and spirometer handling.

Dengue Prevention – IMU Anti-littering campaign where staff and students Gotong Royong cleaned up areas surrounding Bukit Komanwel, IMU, Vista Komanwel A, B, C, Covillea and Savannah.

Dental Health Pangsapuri Balakong Jaya Dental screening and oral health education.

Health Education for Elderly Ti-Ratana Welfare Society Diabetes education, medical screening of heart and Residents lungs and blood pressure screening.

Health Screening for the Rumah Orang Tua Kampung Baru Health screening conducted by the students under the Elderly Sikamat supervision of faculty members. Rumah Sejahtera Jimah Lukut

Diabetes Education for Rumah Sejahtera Seri Setia Diabetes education and the monitoring of elderly Elderly Residents residents with diabetes. Eat Well, Live Well with Medical and nutritional screening and counselling. Umami

Train the Trainers Caring for Residents of Tong Sim Senior Skills evaluation of caregiver for hand washing and the Elderly Citizen Care Centre female perineal care, new teaching sessions on male perineal care, and wound dressing. Health Education and Mental health education, and gardening with the Gardening Workshops elderly.

Health Education Pusat Penjagaan Kanak-Kanak Personal hygiene education. Cacat Taman Megah

Immunisation for Refugee ACR Learning Centre Hepatitis B and Pentavalent vaccines administration. Children Lautu Education Centre ROH Community School Seremban United Learning Centre Dignity for Children Foundation Little Flower Learning Centre

Promoting Adolescent Health SMK Dato’ Abdul Samad Health education on reproductive health, mental health, anti-smoking and substance abuse.

78 IHH Healthcare Berhad | Annual Report 2018 Sustainability

IMU: CASE STUDY

In IMU, the Mata Pelajaran Umum encourages all IMU students to undertake below describes the activities and (MPU) is a pre-university qualification projects that are socially responsible the beneficiaries of the different for private universities in Malaysia. and to engage with the surrounding MPU4 projects in 2018. A total of It focuses on developing practical communities of whom they will serve as RM 3,158 was spent. community-minded skills. MPU4 future health professionals. The table

Project Name Beneficiary Objective

Art for Refuge The National Autism Society 1. To engage the autistic children through social of Malaysia interaction. 2. To expose them to activities that could aid their learning process. 3. To stimulate their motor and sensory skills.

Bloomers Training House Bhd 1. To show the young adults, caretakers and family members how art can have a positive effect on life. 2. To brush up the young adults’ psychomotor skills, such as hand-eye coordination, through specially designed handicrafts. 3. To compile a manual for making specially-designed crafts. 4. To sell products and donate the profits to the foundation.

Alliance of Chin Refugees 1. To teach artistic techniques to the children in order for them to create a craft through their imagination. 2. To help the children develop spatial skills along with the form of art that is taught to them. 3. To develop teaching skills among IMU students.

Chemistry Day at Rumah Rumah Charis — Home for 1. To create awareness about their ingredients in Charis Children commercial products and its sugar content. 2. To create an awareness about the value of money in the children. 3. To ignite interest in the children towards chemistry.

Nutrition Education for 1. To develop creativity amongst the children. Children 2. To encourage nutritional awareness. 3. To nurture teamwork through games and activities.

79 Sustainability OUR COMMUNITY

Project Name Beneficiary Objective

Buddy Programme: Living IMU 1. To encourage international students to converse your Life in Malaysia in Malay. 2. To allow international students to understand what is considered halal food in Malaysia and what to expect when interacting with Malaysians. 3. To ensure that international students do not face difficulties when buying desired foods in the market, hawker stall or elsewhere and to help them integrate into local culture in Malaysia.

Health and Cultural 1. To promote a sense of respect and appreciation Workshops for cultural diversity, and acquire knowledge to function with the various cultures by being sensitive to and by being accepting of the differences. 2. To promote the understanding of the unique local culture, language and ethnic heritage. 3. To develop team spirit, leadership skills and communication skills among students.

Microsoft Words and United Learning Centre (ULC) 1. To provide a platform for the students to learn and Microsoft Excel Basic Skills practice basic computer skills, in particular, Microsoft Workshop Word and Excel. 2. To provide a platform for IMU students to interact with underprivileged children, and serve the community.

Blood Donation Campaign in Asia Pacific University 1. To raise awareness on the importance of being kind in Asia Pacific University the world today. 2. To raise awareness on blood related diseases and HIV. 3. To enlighten the target crowd, with a focus on the youth, on various aspects of the society that may be stigmatised or ridiculed. 4. To raise enough blood to supplement Hospital Tengku Ampuan Rahimah Klang (HTAR).

Love and Care Tasputra Tasputra Perkim 1. To improve and raise awareness on the importance of (Health Promotion) health screening among the caregivers of cerebral palsy children 2. To monitor the health status of the caregivers of cerebral palsy children as a follow-up from the previous year (e.g. blood pressure and fasting blood sugar). 3. To provide knowledge for mental health and to deal with issues associated with stress and anxiety. 4. To educate staff on common health problems associated with Diabetes Mellitus and its preventive measures. 5. To discuss the importance of healthy diet, and how it affects overall well-being.

80 IHH Healthcare Berhad | Annual Report 2018 Sustainability

Project Name Beneficiary Objective

Nutrition and Hygiene Taman Megah Handicapped 1. To raise awareness of proper nutrition and personal and Disabled Children’s hygiene through education and interactive games. Home 2. To teach the children how to prepare a nutritionally balanced meal. 3. To provide a platform for IMU students to apply what they have learned in class by serving the children.

Healthcare to IQ70+ Malaysian Association for 1. To provide health education to the children. the Welfare of Mentally 2. To raise awareness of the importance of hand and oral Challenged Children IQ70+ hygiene, as well as a healthy lifestyle, via education and interactive games. 3. To provide a platform for IMU students to apply what they have learned in class by serving the children.

English Workshop SK Methodist Petaling Jaya 1. To improve speaking skills and introduce basic vocabulary and communication skills to Year 6 students who are weak in English. 2. To encourage the students to speak English confidently among peers. 3. To provide a platform for IMU students to serve the community.

Cultivation of scientific Lautu Refugee Learning 1. To cultivate the children’s interest in the field of Science experimental knowledge, Centre by conducting scientific experiments. English communication 2. To enhance the children’s English language and cultural insight among communication skills through drama. children 3. To give a brief overview of the cultural aspects of Malaysia. 4. To improve the children’s soft skills, such as teamwork and co-operation, through various interactive games.

Educational Activities in 1. To teach basic postural health. Lautu Education Centre 2. To educate and strengthen the children’s basic grasp of Bahasa Malaysia.

Growing Healthy Kids 1. To ensure that the children know the meaning and benefits of a healthy lifestyle through fun and interactive activities related to proper nutrition, hand hygiene and physical exercise. 2. To provide a platform for IMU students to apply what they have learned in class and through experiential learning by serving the children.

81 Sustainability OUR COMMUNITY

Project Name Beneficiary Objective

Interactive Activities for Rumah Victory Children and 1. To help the children understand the structure of the Revision of Body Systems Youth Home human body and the importance of social interaction.

Importance of Vaccination Alliance of Chin Refugees 1. To shed light upon the importance of vaccines, elaborating upon their protective qualities, as well as dispelling rumours regarding the false information on vaccines. Hygiene Awareness at 1. To raise awareness of proper food handling, communal Alliance of Chin Refugees hygiene as well as oral and hand hygiene through educational talks and interactive games. 2. To provide IMU students an opportunity to educate the underprivileged and to give back to the community.

Day Trip with the children at Ti-Ratana Social Welfare 1. To explore each career and understand the roles and Ti-Ratana Society responsibilities expected of different occupations.

How to Maintain Proper IMU Bukit Jalil Campus 1. To demonstrate good sitting postures and stress their Sitting Posture importance. 2. To demonstrate a few exercises that can help to keep the body in a good form.

Ovitrap Surveillance and IMU Bukit Jalil Campus 1. To reduce the risk of dengue in the Bukit Jalil campus. Dengue Awareness Survey 2. To gauge the dengue awareness among MBBS students at Bukit Jalil campus. 3. To raise awareness of dengue prevention and control through posters and educational campaigns.

"Let’s Speak English!" United Learning Centre – 1. To improve the standard of English among the children Kuala Lumpur currently attending United Learning Centre. 2. To serve and give back to society by teaching and instruction. 3. To provide a platform for IMU students to apply what they have learned in class by serving the children.

Health is Wealth Rumah Victory Elderly Home 1. To create awareness of the benefits and aspects of good health. 2. To teach the elderly about BMI. 3. To advise the elderly on their nutrition intake and the benefits of exercise. 4. To engage the elderly in a simple exercise routine.

82 IHH Healthcare Berhad | Annual Report 2018 Sustainability

Project Name Beneficiary Objective

Stand Straight to Feel Tall Rumah Victory Children and 1. To raise awareness of the importance of maintaining a Youth Home proper posture, which affects spinal health. 2. To enhance the children’s understanding of stretching exercises and warming up and cooling down before and after exercise. 3. To provide a platform for IMU students to apply what they have learned in class by serving the children.

Me and My Body: Muscular Rumah Victory Children and 1. To teach the children how the body works, specifically System Youth Home the musculoskeletal system. 2. To increase the awareness of proper exercise techniques to prevent injuries.

83 84 IHH Healthcare Berhad | Annual Report 2018 Governance

Board of Directors 86 Governance Group Management 98 Corporate Governance Overview Statements 103 Nomination Committee Report 114 Remuneration Committee Report 119 Audit Committee Report 121 Risk Management Committee Report 126 Statement on Risk Management 128 and Internal Control Audit Committee Report 121 Sustainability Governance 135 Investor Relations Report 136 LEADING STEWARDSHIP

We embed a culture of governance through every level of our business and operations, with the Board driving the tone from the top. Guided by our corporate values and principles, we continually seek to enhance value and gain the trust and confidence of our stakeholders as we conduct our business.

85 Governance BOARD OF DIRECTORS

Work Experience Dato’ Mohammed Azlan bin Hashim was appointed to the Board of IHH Healthcare Berhad (“IHH”) in 2011 as Deputy Chairman and was re-designated from Non-Independent Non-Executive Deputy Chairman to Non-Independent Non-Executive Chairman on 1 January 2018. On 27 November 2018, Dato’ Mohammed Azlan bin Hashim was re-designated from Non-Independent Non-Executive Chairman to Independent Non-Executive Chairman following his cessation as a nominee director of Khazanah Nasional Berhad.

Dato’ Azlan previously served as Executive Chairman of the (then) Kuala Lumpur Stock Exchange Group from 1998 to 2004 and in various other senior management roles, including at Bumiputra Merchant Bankers Berhad and Amanah Capital Malaysia Berhad.

Academic/Professional Qualification(s) • Bachelor of Economics, Monash University • Fellow Member, Institute of Chartered Accountants, Australia • Member, Malaysian Institute of Accountants • Fellow Member, The Malaysian Institute of Chartered Secretaries and Administrators

Present Directorship(s) Dato’ Mohammed Azlan bin Hashim • D&O Green Technologies Berhad Chairman, Independent, Non-Executive • Marine & General Berhad Chairman of the Steering Committee

Nationality: Malaysian Gender: Male Age: 62 Date of Appointment: 30 March 2011 Length of Service: 8 years (As at 3 April 2019) Last Date of Re-election: 27 May 2016

Notes • Does not have any family relationships with any directors and/or any major shareholders of the Company • Does not have any conflict of interest with the Company • Does not have any convictions for offences within the past five years other than for traffic offences, if any • Details of the Directors’ attendance at Board meetings are set out in the Corporate Governance Overview Statement on pages 103 to 113 of this Annual Report

86 IHH Healthcare Berhad | Annual Report 2018 Governance

Work Experience Dr Tan See Leng was appointed the Managing Director and Chief Executive Officer of IHH Healthcare Berhad (“IHH”) in January 2014 after serving as an Executive Director on the IHH Board for two years. Dr Tan is also the Group CEO and Managing Director of Parkway Pantai Limited, a position he assumed in 2011. He also serves on the Boards of IHH subsidiaries, namely Parkway Pantai Limited, Fortis Healthcare Limited, SRL Limited and Acibadem Saglik Yatirimlari Holding A.S. (“ASYH”) Group and on a Board Committee of ASYH. He also serves on the Advisory Board of Lee Kong Chian School of Business at Singapore Management University and on the Board of Parkway Trust Management Limited (“PTM”), an indirect wholly-owned subsidiary of IHH. PTM manages Parkway Life Real Estate Investment Trust, which is listed on the Singapore Exchange Securities Trading Limited.

Prior to this, Dr Tan was the CEO of Parkway Holdings Limited from April 2010, a position he rose to fairly quickly after he joined Parkway in 2004 as Chief Operating Officer of Mount Elizabeth Hospital. As a young entrepreneur, Dr Tan founded a private primary healthcare group at the age of 27 and subsequently developed it into the second largest primary healthcare group in Singapore before successfully selling the company to a leading global health-plan and insurance provider.

Dr Tan See Leng With over 27 years of healthcare experience, Dr Tan has served as an active member of various medical Managing Director and Chief Executive Officer, committees, such as Singapore Ministry of Health’s Non-Independent, Executive MediShield Life Review Committee. He has been Member of the Steering Committee re-appointed Adjunct Assistant Professor of Duke-NUS Graduate Medical School Singapore, Office of Education, for the period until 2019.

Academic/Professional Qualification(s) • Bachelor of Medicine and Bachelor of Surgery (MBBS), National University of Singapore Nationality: Singaporean • Master of Medicine (Family Medicine), National Gender: Male University of Singapore Age: 54 • Master of Business Administration, University of Date of Appointment: 5 April 2012 Chicago Booth School of Business Length of Service: 7 years (As at 3 April 2019) Last Date of Re-election: 22 May 2017 • Fellow, Academy of Medicine, Singapore • Fellow, College of Family Physicians, Singapore

Present Directorship(s) • Nil

87 Governance BOARD OF DIRECTORS

Work Experience Appointed to the Board of IHH Healthcare Berhad (“IHH”) in 2012, Mr Mehmet Ali Aydinlar is also the Chairman of Acibadem Saglik Yatirimlari Holding A.S. ("ASYH"), a 90%-owned subsidiary of IHH. He was re-designated from Executive Director to Non-Executive Director of IHH on 1 March 2019 following his cessation as the Chief Executive Officer (“CEO”) of ASYH. Mr Mehmet Ali Aydinlar, after an illustrious tenure as founding CEO of ASYH, continues to serve as the Chairman of the Board of the Acibadem group of companies, which includes A Plus, Acibadem Project Management, Acibadem Mobile Services and Acibadem Labmed. He is also the Chairman of the Turkish Accredited Hospitals Association and Vice Chairman of Private Hospitals and Healthcare Institutions Association (OHSAD). As of 2015, Mr Aydinlar has been serving on the board of the Foreign Economic Relations Board (DEIK). This institution is responsible for leading foreign economic relations within the Turkish private sector in a myriad of sectors, as well as for increasing the export volume of Turkish businesses and coordinating similar business development activities. A certified public accountant-turned-entrepreneur, Mr Aydinlar has been recognised for his extensive experience in management and involvement in the healthcare sector since 1993. Mr Aydinlar was chosen “Ernst & Young Entrepreneur of the Year, Turkey” for the year 2018 and in 2015, Mr Aydinlar received the “Lifetime Achievement Award” from Bogazici University, one of the Mehmet Ali Aydinlar most prestigious higher education institutions in Turkey. Prior to this, he was elected “Business Man of the Year” by Non-Independent, Non-Executive the same university. Mr Aydinlar was also awarded “The Eminent Services Award of the Grand National Assembly of Turkey” in 2010. He was also chosen to be “The Person with Most Contribution to Development of Healthcare” by the Turkish Healthcare Volunteers Organisation. In 2006, he was named “Male Entrepreneur of the Year” in a survey conducted by Ekonomist Magazine and “Business Executive of the Year” by Dunya Newspaper and Istanbul University’s School of Business Administration. Being a philanthropist, Mr Aydinlar is also the Chairman Nationality: Turkish of the Board of Trustees of Acibadem University, an Gender: Male ambitious social responsibility undertaking initiated by Age: 62 Mr Aydinlar to advance healthcare in Turkey through Date of Appointment: 24 January 2012 education and research. For two years in a row, Mr Aydinlar Length of Service: 7 years 2 months (As at 3 April 2019) was recognised by Capital Magazine for his philanthropic Last Date of Re-election: 22 May 2017 efforts as one of the top business people with the most charitable donations, ranking at number five in 2014. Academic/Professional Qualification(s) • Business Administration Degree, Galatasaray Economy and Management College Present Directorship(s) • Nil Notes • Does not have any family relationships with any directors and/or any major shareholders of the Company • Does not have any conflict of interest with the Company • Does not have any convictions for offences within the past five years other than for traffic offences, if any • Details of the Directors’ attendance at Board meetings are set out in the Corporate Governance Overview Statement on pages 103 to 113 of this Annual Report

88 IHH Healthcare Berhad | Annual Report 2018 Governance

Work Experience Appointed to the Board of IHH Healthcare Berhad ("IHH") in 2016, Mr Chintamani Bhagat is the Executive Director in charge of Khazanah Nasional Berhad’s holding in IHH and other investments in the healthcare sector, and is concurrently the head of private markets for South Asia. He also serves on the Boards of IHH subsidiaries, namely Fortis Healthcare Limited and Acibadem Saglik Yatirimlari Holding A.S. ("ASYH") Group and Board Committees of ASYH. Prior to joining Khazanah, Mr Bhagat spent 14 years at McKinsey & Company in Singapore, including six years as Managing Partner for the Singapore office. He was a leader in healthcare practice, serving hospital systems across Asia, as well as a leader in Principal Investor practice, serving several sovereign wealth funds, private equity firms and family owned businesses. He also founded and led McKinsey’s corporate governance service line. Preceding his time at McKinsey, Mr Bhagat was the Chief Executive Officer of an engineering and construction firm in India. Academic/Professional Qualification(s) • Master of Business Administration, INSEAD Business School Present Directorship(s) • Nil

Chintamani Aniruddha Bhagat Non-Independent, Non-Executive Member of the Steering Committee Member of the Nomination Committee Member of the Remuneration Committee

Nationality: Singaporean Gender: Male Age: 49 Date of Appointment: 23 September 2016 Length of Service: 2 years 6 months (As at 3 April 2019) Last Date of Re-election: 22 May 2017

89 Governance BOARD OF DIRECTORS

Work Experience Appointed to the Board of IHH Healthcare Berhad (“IHH”) on 1 April 2017, Mr Koji Nagatomi currently serves as the Managing Officer and Chief Operating Officer, Healthcare and Service Business Unit of Mitsui & Co., Ltd (“Mitsui”) at its Tokyo Headquarters. Between 2011 and 2015, he served in the position of General Manager for several of Mitsui’s divisions. These included Mitsui’s Planning and Administrative Division (Machinery and Infrastructure), First Projects Development Division and Corporate Communications Division. In May 2008, he was appointed Deputy General Manager of Toyo Engineering Corporation’s Corporate Planning Unit.

Preceding his tenure at Toyo Engineering Corporation, Mr Nagatomi served as the General Manager of the Infrastructure Project Development Division of Mitsui & Co. (Asia Pacific) Pte Ltd in Kuala Lumpur from December 2003. Prior to that, Mr Nagatomi joined the Project Development Division of Mitsui’s Indonesia Project Section which was based out of Tokyo. He spent eight years at Mitsui & Co. (USA), Inc in Houston under the Plant & Energy Project Development Department after beginning his professional career in 1986 in Mitsui’s Chemical Plant Division.

Academic/Professional Qualification(s) Koji Nagatomi • Master’s Degree, Chemical Engineering, Graduate School of Engineering Science, Osaka University Non-Independent, Non-Executive Present Directorship(s) • Nil

Nationality: Japanese Gender: Male Age: 58 Date of Appointment: 1 April 2017 Length of Service: 2 years (As at 3 April 2019) Last Date of Re-election: 22 May 2017

90 IHH Healthcare Berhad | Annual Report 2018 Governance

Work Experience Appointed to the Board of IHH Healthcare Berhad (“IHH”) in 2019, Mr Takeshi Saito was an alternate director to Mr Koji Nagatomi, a role he assumed since April 2017. He was also an alternate director to Mr Satoshi Tanaka, a former Director of IHH, from June 2015 to April 2016. He also serves on certain Boards of IHH subsidiaries under Acibadem Saglik Yatirimlari Holding A.S. Group. Mr Saito currently serves as Chief Executive Officer (“CEO”) of MBK Healthcare Management (“MHM”), a wholly-owned subsidiary of Mitsui & Co., Ltd (“Mitsui”) based in Singapore, which manage the healthcare assets within the portfolio of Mitsui.

Mr Saito has spent most of his career in the healthcare industry. Preceding his appointment as CEO of MHM, he served as General Manager of Healthcare Business 1st Department in Healthcare Business Division of Mitsui. In 2017, he was an Executive Assistant to a Representative Director and Executive Vice President of Mitsui. Between 2015 and 2016, he was the General Manager of the Provider Network Department, Medical Healthcare Business Division 1, Consumer Service Business Unit of Mitsui and during that time, he also sat on the Board and Executive Committee of Parkway Pantai Limited as an alternate director. In 2011, Mr Saito was seconded to Parkway Group Healthcare as Vice President of Strategic Takeshi Saito Planning, following his appointment as Director of the Medical Healthcare Business Department at Mitsui, Non-Independent, Non-Executive where he led the investment in IHH. Member of the Steering Committee Prior to this in 2007, Mr Saito was appointed Manager of the Strategic Planning/Business Development Department of the Life Science Division at Mitsui, which subsequently became the Medical Healthcare Division in 2008. He also initiated the 10-year plan for the newly formed Medical Healthcare Division.

Academic/Professional Qualification(s) Nationality: Japanese • Bachelor of Political Science, Keio University, Japan Gender: Male • Master of Business Administration, Kellogg School of Age: 47 Management, Northwestern University Date of Appointment: 28 March 2019 Length of Service: – (As at 3 April 2019) Present Directorship(s) Last Date of Re-election: – • Nil

91 Governance BOARD OF DIRECTORS

Work Experience Appointed to the Board of IHH Healthcare Berhad in 2012, Mr Chang See Hiang also serves as an Independent Director on the Board of Jardine Cycle & Carriage Limited, a company listed on the Main Board of the Singapore Exchange Securities Trading Limited (“SGX-ST”). Mr Chang has been an Advocate and Solicitor of the Supreme Court of Singapore since 1979 and is a Senior Partner of his law practice, Chang See Hiang & Partners.

Mr Chang previously sat on the boards of five other companies listed on the SGX-ST and one on the Hong Kong Stock Exchange.

Academic/Professional Qualification(s) • Bachelor of Laws (Hons), University of Singapore

Present Directorship(s) • Nil

Chang See Hiang Senior Independent, Non-Executive Member of the Audit Committee Member of the Risk Management Committee Member of the Nomination Committee Member of the Remuneration Committee

Nationality: Singaporean Gender: Male Age: 65 Date of Appointment: 5 April 2012 Length of Service: 7 years (As at 3 April 2019) Last Date of Re-election: 22 May 2017

92 IHH Healthcare Berhad | Annual Report 2018 Governance

Work Experience Appointed to the Board of IHH Healthcare Berhad (“IHH”) in 2012, Ms Rossana Annizah binti Ahmad Rashid also serves on the Board and Board Committee of Acibadem Saglik Yatirimlari Holding A.S., an indirect subsidiary of IHH. She is also a Non-Executive Director of Parkway Trust Management Limited (“PTM”), an indirect wholly-owned subsidiary of IHH. PTM manages Parkway Life Real Estate Investment Trust which is listed on the Singapore Exchange Securities Trading Limited.

Ms Rossana concurrently serves as a member of the Investment Panel and the Investment Panel Risk Committee of Malaysia’s Employees Provident Fund. She also serves as the Country Chairman of the Jardine Matheson Group of Companies in Malaysia and Deputy Chairman/Non-Independent Non-Executive Director on the Board of Cycle & Carriage Bintang Berhad, a member of the Jardine Matheson Group. She was appointed as Independent Non-Executive Director of edotco Group Sdn Bhd in May 2016 and Independent Non-Executive Director of Celcom Axiata Berhad in May 2017, both are subsidiaries of Axiata Group Berhad.

Prior to her current roles, Ms Rossana was a career professional holding leadership positions in the telecommunications and banking sectors. She previously served in various senior management roles with TIME Rossana Annizah binti Ahmad Rashid dotCom Berhad, Maxis Berhad and RHB Bank Berhad, after beginning her banking career with Citibank Malaysia. Independent, Non-Executive With a combined 30 years of experience, Ms Rossana Chairman of the Audit Committee has broad experience in business strategy, identifying Chairman of the Risk Management Committee sustainable monetisation models, understanding Member of the Nomination Committee customers and competition, as well as the need for Member of the Remuneration Committee reviewing monetisation models by focusing on both revenue management and cost management.

Academic/Professional Qualification(s) • Bachelor of Arts in Banking and Finance, Canberra Nationality: Malaysian College of Advanced Education (now known as the Gender: Female University of Canberra), Australia Age: 53 Date of Appointment: 17 April 2012 Present Directorship(s) Length of Service: 6 years 11 months (As at 3 April 2019) • Cycle & Carriage Bintang Berhad Last Date of Re-election: 28 May 2018 • Celcom Axiata Berhad

93 Governance BOARD OF DIRECTORS

Work Experience Appointed to the Board of IHH Healthcare Berhad (“IHH”) in 2014, Mr Shirish Moreshwar Apte is currently also the Independent, Non-Executive, Chairman of Pierfront Mezzanine Fund Pte Ltd. He also serves on the Boards of IHH subsidiaries, namely Fortis Healthcare Limited and Acibadem Saglik Yatirimlari Holding A.S. ("ASYH") and on a Board Committee of ASYH. He concurrently serves on several Boards of Directors, including the Commonwealth Bank of Australia, the Supervisory Board of Bank Handlowy, Poland and Fullerton India Credit Company Limited.

He was a Council Member of the Institute of Banking and Finance Singapore until his retirement in May 2018. Prior to his retirement from Citigroup in 2014 as Chairman of Asia Pacific Banking, Mr Apte had built up an impressively extensive 32-year career with Citibank/Citigroup. He held numerous positions with Citibank/Citigroup serving in Singapore (2011–2013), Hong Kong (2009–2011), London (2003–2009), Poland (1997–2003) and London (1993–1997). He also supervised operations in the emerging markets covering Central and Eastern Europe, Middle East, Africa (“CEEMEA”) and Asia Pacific. He was appointed head of Citi’s Corporate and Investment bank in India, CEO for Citibank Poland and regional CEO, first for CEEMEA and then Asia Pacific. Mr Apte was also a member Shirish Moreshwar Apte of Citigroup’s Executive and Operating Committees from 2008–2012 and the Group’s Business Practices Independent, Non-Executive Committee. He began his career in the banking division of Citibank India in 1981. Chairman of the Nomination Committee Chairman of the Remuneration Committee Academic/Professional Qualification(s) Member of the Audit Committee • Bachelor of Commerce, Calcutta University Member of the Risk Management Committee • Master of Business Administration — London Business School (Major in Finance) • Institute of Chartered Accountants England — Student contract with Touche Ross (now known as Deloitte)

Nationality: British Present Directorship(s) Gender: Male Age: 66 • Nil Date of Appointment: 3 September 2014 Length of Service: 4 years 7 months (As at 3 April 2019) Last Date of Re-election: 28 May 2018

94 IHH Healthcare Berhad | Annual Report 2018 Governance

Work Experience Appointed to the Board of IHH Healthcare Berhad (“IHH”) in 2018, Ms Jill Margaret Watts currently serves on the Board of Governors of Sidra Medicine. She was previously a Director of the Australian Chamber of Commerce, United Kingdom, the Royal Australian Flying Doctor Service, United Kingdom, Ramsay Sante in France and the Netcare Group in South Africa. Ms Watts also served on several Industry Boards including NHS Partners Network and the Association of Independent Hospital Operators.

Ms Watts was the Group Chief Executive Officer of BMI (GHG) Health Care Group (“BMI Healthcare”) in United Kingdom from 2014 to 2017. She has over 40 years of experience in the healthcare industry and has held a number of senior executive roles in Australia and the United Kingdom. Prior to her appointment at BMI Healthcare, she was the Group Chief Executive Officer of Ramsay Health Care, United Kingdom (“Ramsay UK”) for over six years. She was the Chair of NHS Partners Network between 2009 and 2012, where she was actively engaged in influencing governments on the benefits of having a strong and vibrant private healthcare sector.

In 2010, Ms Watts was voted as the most influential leader in United Kingdom private healthcare and in 2013 as one of healthcare’s most inspirational women. Under her leadership, Ramsay UK was voted as the best United Jill Margaret Watts Kingdom private hospital provider in 2009 and 2013.

Independent, Non-Executive Academic/Professional Qualification(s) Member of the Audit Committee • Registered Nurse, Northwick Park Hospital, London, Member of the Risk Management Committee United Kingdom • Midwifery, Mater Mothers Hospital, Brisbane, Australia • Grad. Dip Health Administration and Information Systems, University of Central Queensland, Australia • Master’s in Business Administration, Griffith University, Queensland, Australia Nationality: Australian • Wharton Fellow, Pennsylvania University, United States Gender: Female of America Age: 60 Date of Appointment: 4 April 2018 Present Directorship(s) Length of Service: 1 year (As at 3 April 2019) • Nil Last Date of Re-election: 28 May 2018

95 Governance BOARD OF DIRECTORS

Work Experience Ms Quek Pei Lynn is an alternate director to Mr Chintamani Aniruddha Bhagat on the Board of IHH Healthcare Berhad (“IHH”), a role she assumed on 23 September 2016. She also serves on the Board and Board Committee of IHH subsidiary, IMU Health Sdn Bhd. Prior to her current position in IHH, she was appointed alternate director to YM Tengku Dato’ Sri Azmil Zahruddin bin Raja Abdul Aziz on 25 October 2012 and ceased to be his alternate on 23 September 2016, following his resignation as a Director of IHH. Ms Quek also serves as a Director at the Investments Division of Khazanah Nasional Berhad (“Khazanah”), a position she has held since joining the company in 2007.

Prior to joining Khazanah, Ms Quek served in the Corporate Finance Division at AmInvestment Bank Berhad for nine years from 1997 to 2006 after beginning her career as an auditor with PriceWaterhouse Coopers in 1994.

Academic/Professional Qualification(s) • Bachelor of Economics, Monash University, Australia

Present Directorship(s) • Nil Quek Pei Lynn Non-Independent, Non-Executive (Alternate Director to Mr Chintamani Aniruddha Bhagat) Member of the Steering Committee (Alternate to Mr Chintamani Aniruddha Bhagat)

Nationality: Malaysian Gender: Female Age: 46 Date of Appointment: 25 October 2012 Length of Service: 6 years 5 months (As at 3 April 2019) Last Date of Re-election: –

96 IHH Healthcare Berhad | Annual Report 2018 Governance

Work Experience Mr Tomo Nagahiro is an alternate director to Mr Koji Nagatomi on the Board of IHH Healthcare Berhad (“IHH”), a role he assumed on 3 April 2019. Since April 2019, he has been General Manager of Healthcare Business 1st Department in Healthcare Business Division of Mitsui & Co., Ltd (“Mitsui”), overseeing Mitsui’s investment in IHH.

Mr Nagahiro has over 20 years of working experience having served in multiple divisions in Mitsui, spanning from strategic planning, business development and operations management. Preceding his appointment as General Manager of Healthcare Business 1st Department at Mitsui, he was seconded to MIMS Pte. Ltd. (“MIMS”) which is based in Singapore as the Chief Operating Officer from 2015 to 2018. MIMS is one of the largest multichannel providers of drug information and medical education for healthcare professionals in Asia Pacific region. During this period, he was responsible for the general management of regional business activities and development of the company.

Prior to this, Mr Nagahiro was seconded to Parkway Pantai Limited, a wholly-owned subsidiary of IHH, as Assistant Vice President of Strategic Planning and Business Development where he led multiple business development projects from 2013 to 2015.

Tomo Nagahiro Academic/Professional Qualification(s) Non-Independent, Non-Executive • Bachelor of Arts in Law, University of Tokyo, Japan (Alternate Director to Koji Nagatomi) • Master of Business Administration, Kellogg School of Management, Northwestern University

• U.S. Certified Public Accountant

Present Directorship(s) • Nil

Nationality: Japanese Gender: Male Age: 43 Date of Appointment: 3 April 2019 Length of Service: – (As at 3 April 2019) Last Date of Re-election: –

97 Governance GROUP MANAGEMENT

Work Experience primary healthcare group at the age of 27 and subsequently developed it into the second largest Dr Tan See Leng was appointed the Managing primary healthcare group in Singapore before Director and Chief Executive Officer of IHH successfully selling the company to a leading Healthcare Berhad (“IHH”) in January 2014 after global health-plan and insurance provider. serving as an Executive Director on the IHH Board for two years. Dr Tan is also the Group CEO and With over 27 years of healthcare experience, Dr Tan Managing Director of Parkway Pantai Limited, a has served as an active member of various medical position he assumed in 2011. He also serves on the committees, such as Singapore Ministry of Health’s Boards of IHH subsidiaries, namely Parkway Pantai MediShield Life Review Committee. He has been Limited, Fortis Healthcare Limited, SRL Limited and re-appointed Adjunct Assistant Professor of Acibadem Saglik Yatirimlari Holding A.S. (“ASYH”) Duke-NUS Graduate Medical School Singapore, Group and on a Board Committee of ASYH. He also Office of Education, for the period until 2019. serves on the Advisory Board of Lee Kong Chian School of Business at Singapore Management Academic/Professional University and on the Board of Parkway Trust Management Limited (“PTM”), an indirect wholly- Qualification(s) owned subsidiary of IHH. PTM manages Parkway • Bachelor of Medicine and Bachelor of Surgery Life Real Estate Investment Trust, which is listed on (MBBS), National University of Singapore the Singapore Exchange Securities Trading Limited. • Master of Medicine (Family Medicine), National Dr Tan See Leng University of Singapore Prior to this, Dr Tan was the CEO of Parkway Managing Director and Holdings Limited from April 2010, a position he rose • Master of Business Administration, University of Chicago Booth School of Business Chief Executive Officer, to fairly quickly after he joined Parkway in 2004 as Chief Operating Officer of Mount Elizabeth Hospital. • Fellow, Academy of Medicine, Singapore Non-Independent, Executive As a young entrepreneur, Dr Tan founded a private • Fellow, College of Family Physicians, Singapore

Nationality: Singaporean Age: 54 (As at 3 April 2019) Notes Date of Joining: 5 April 2012 • Does not have any family relationships with any directors and/or any major shareholders of the Company • Does not have any conflict of interest with the Company • Does not have any convictions for offences within the past five years other than for traffic offences, if any

Work Experience Whilst Mr Low was based in Hong Kong from 1994 to 2005, he held various positions within the Kerry Mr Low Soon Teck assumed the position of Group Group, including that of Director of China Operations Chief Financial Officer of IHH Healthcare Berhad at SCMP Group, publisher of the South China (“IHH”) on 10 January 2016. He brings with him over Morning Post. In these roles, he was responsible for 20 years of experience in finance, legal and general business development, newspaper publishing and management in leadership roles. circulation operations, as well as managing a chain Prior to joining IHH, Mr Low served with the RCMA of retail convenience stores. Group, a commodities supply chain management Mr Low began his career as a solicitor in Singapore company, as its Chief Financial Officer between 2013 at a boutique law firm from 1991 to 1993, focusing and 2015. From 1994 to 2013, he was employed on corporate and banking laws. in the Kuok/Kerry Group, holding various senior positions in diverse businesses within the group in Hong Kong and Singapore. His last position in the Academic/Professional group was as Chief Financial Officer of the PACC Qualification(s) Offshore Services Holdings Group, the offshore • Bachelor of Laws (Hons) (2nd Upper), marine arm of the Kuok/Kerry Group. Prior to this, National University of Singapore Mr Low served as Group Treasurer at Wilmar • Master of Business Administration, International Limited, after its merger in 2006 with University of Chicago, Booth School of Business Low Soon Teck Kuok Oils and Grains where he had served as Group Financial Controller following his relocation • Advocate and Solicitor, Supreme Court of Group Chief Financial Officer from Hong Kong to Singapore in 2005. Singapore • Member of Law Society of England and Wales

Nationality: Singaporean Age: 54 (As at 3 April 2019) Notes Date of Joining: 10 January 2016 • Does not have any family relationships with any directors and/or any major shareholders of the Company • Does not have any conflict of interest with the Company • Does not have any convictions for offences within the past five years other than for traffic offences, if any

98 IHH Healthcare Berhad | Annual Report 2018 Governance

Work Experience Academic/Professional Dr Lim Suet Wun is the Group Chief Operating Officer Qualification(s) of IHH Healthcare Berhad (“IHH”). • Bachelor of Medicine and Bachelor of Surgery He brings more than 30 years of experience in (MBBS), National University of Singapore healthcare management. Dr Lim has served Parkway • Master of Business Administration, University of Pantai since 2011, first as Executive Vice President California, Los Angeles Singapore and then as the Chief Executive Officer, • Master of Public Health, University of California, Parkway Operations Division, before assuming the Los Angeles role of Group COO of Parkway Pantai. Prior to joining Parkway, Dr Lim was the CEO of the National Healthcare Group and Tan Tock Seng Hospital (TTSH). In 2003, Dr Lim led the TTSH team through the SARS crisis, when the hospital was designated the SARS hospital for the whole of Singapore. For his leadership, he was awarded the Public Service Star by the President of Singapore. Dr Lim was also the former chairman of the Board of Dr Lim Suet Wun Joint Commission International (JCI). Group Chief Operating Officer

Nationality: Singaporean Age: 59 (As at 3 April 2019) Notes Date of Joining: 1 March 2011 • Does not have any family relationships with any directors and/or any major shareholders of the Company • Does not have any conflict of interest with the Company • Does not have any convictions for offences within the past five years other than for traffic offences, if any

Work Experience Academic/Professional Dr Chan has more than 20 years of healthcare Qualification(s) management experience. He had a long association • Bachelor of Medicine and Bachelor of Surgery with IHH and its predecessor entity Parkway (MBBS), National University of Singapore Healthcare from 2000–2010. Among the various • Master of Business Administration, University positions held, he was the interim Group Chief of Chicago Executive Officer of Pantai Holdings Berhad. He returned to IHH in 2018 to lead IHH Strategic Planning and Business Development (M&A) and the CEO for South East Asia Operations. Additionally, he is a Director of Fortis Healthcare Ltd (listed on the India Stock Exchange) and RHT Health Trust Pte. Ltd (listed on the SGX). Prior to joining IHH in 2018, he was a senior advisor to a private equity investment firm. From 2010–2016, he was the Group President of Sasteria Pte Ltd, a privately held healthcare entity, which owns Thomson Medical Group based in Singapore and TMC Life Dr Chan Boon Kheng Sciences based in Kuala Lumpur, Malaysia. He concurrently served as the Group CEO of Thomson, Group Head, Strategic Planning & as well as the Executive Director of TMC Life Business Development Sciences Limited. Dr Chan had also served as an (Merger & Acquisition) Advisor to a sovereign wealth fund based in Abu Dhabi. Chief Executive Officer, South East Asia Operations Division

Nationality: Singaporean Age: 51 (As at 3 April 2019) Notes Date of Joining: 2 January 2018 • Does not have any family relationships with any directors and/or any major shareholders of the Company • Does not have any conflict of interest with the Company • Does not have any convictions for offences within the past five years other than for traffic offences, if any

99 Governance GROUP MANAGEMENT

Work Experience the “Lifetime Achievement Award” from Bogazici University, one of the most prestigious higher Appointed to the Board of IHH Healthcare Berhad education institutions in Turkey. Prior to this, he was (“IHH”) in 2012, Mr Mehmet Ali Aydinlar is also the elected “Business Man of the Year” by the same Chairman of Acibadem Saglik Yatirimlari Holding A.S. university. Mr Aydinlar was also awarded “The (“ASYH”), a 90%-owned subsidiary of IHH. He Eminent Services Award of the Grand National was re-designated from Executive Director to Assembly of Turkey” in 2010. He was also chosen Non-Executive Director of IHH on 1 March 2019 to be “The Person with Most Contribution to following his cessation as the Chief Executive Officer Development of Healthcare” by the Turkish (“CEO”) of ASYH. Mr Mehmet Ali Aydinlar, after an Healthcare Volunteers Organisation. In 2006, he was illustrious tenure as founding CEO of ASYH, named “Male Entrepreneur of the Year” in a survey continues to serve as the Chairman of the Board of conducted by Ekonomist Magazine and “Business the Acibadem group of companies, which includes Executive of the Year” by Dunya Newspaper and A Plus, Acibadem Project Management, Acibadem Istanbul University’s School of Business Mobile Services and Acibadem Labmed. He is also Administration. the Chairman of the Turkish Accredited Hospitals Association and Vice Chairman of Private Hospitals Being a philanthropist, Mr Aydinlar is also the and Healthcare Institutions Association (OHSAD). Chairman of the Board of Trustees of Acibadem University, an ambitious social responsibility As of 2015, Mr Aydinlar has been serving on the undertaking initiated by Mr Aydinlar to advance board of the Foreign Economic Relations Board healthcare in Turkey through education and research. Mehmet Ali Aydinlar (DEIK). This institution is responsible for leading For two years in a row, Mr Aydinlar was recognised foreign economic relations within the Turkish private by Capital Magazine for his philanthropic efforts Chairman, Acibadem Saglik sector in a myriad of sectors, as well as for increasing as one of the top business people with the most Yatirimlari Holding A.S the export volume of Turkish businesses and charitable donations, ranking at number five in 2014. coordinating similar business development activities. Non-Independent, Non-Executive A certified public accountant-turned-entrepreneur, Academic/Professional Mr Aydinlar has been recognised for his extensive Qualification(s) experience in management and involvement in the healthcare sector since 1993. Mr Aydinlar was chosen • Business Administration Degree, Galatasaray “Ernst & Young Entrepreneur of the Year, Turkey” for Economy and Management College Nationality: Turkish the year 2018 and in 2015, Mr Aydinlar received Age: 62 (As at 3 April 2019) Notes Date of Joining: 24 January 2012 • Does not have any family relationships with any directors and/or any major shareholders of the Company • Does not have any conflict of interest with the Company • Does not have any convictions for offences within the past five years other than for traffic offences, if any

Work Experience Academic/Professional Mr Tahsin Güney was appointed as the Chief Qualification(s) Executive Officer of Acibadem Saglik Yatirimlari • Bachelor of Public Administration, Middle East Holding A.S on 1 March 2019. He is a highly Technical University, Ankara, Turkey experienced healthcare professional with deep • Master of Actuarial Science and Statistics, knowledge on hospital operations and management. City University, London, UK He first joined Acibadem in 2008 as Planning and Business Development Director and has served as Deputy General Manager since 2013. Armed with a Bachelor’s degree in Public Administration and a Master’s degree in Actuarial Science and Statistics, Mr Tahsin Güney started his career in 1990 as an Assistant Inspector at Turkey’s Social Security Agency, where he rose through the ranks to become Acting President and Acting President of the Board in 2008.

Tahsin Güney Chief Executive Officer, Acibadem Saglik Yatirimlari Holding A.S

Nationality: Turkish Age: 52 (As at 3 April 2019) Notes Date of Joining: 1 March 2019 • Does not have any family relationships with any directors and/or any major shareholders of the Company • Does not have any conflict of interest with the Company • Does not have any convictions for offences within the past five years other than for traffic offences, if any

100 IHH Healthcare Berhad | Annual Report 2018 Governance

Work Experience Medicine, Haematology and Medical Oncology at several leading overseas institutions in Singapore, Professor Abdul Aziz Baba was promoted as the Scotland and Melbourne, Australia. President of IMU Health Sdn Bhd, a wholly-owned subsidiary of IHH Healthcare Berhad (“IHH”), His past national appointments include those of on 1 January 2018. Since 1 January 2016, he is also President of the Malaysian Society of Haematology the Chief Executive Officer and Vice-Chancellor of and Chairman of the National Conjoint Board for IMU Education Sdn Bhd, a wholly-owned subsidiary Postgraduate Medical Programmes, as well as of IHH, responsible for operating the International Chairman of the Specialist Advisory Committee Medical University (“IMU”). Prior to assuming this role, (Clinical Haematology) of the National Specialist Prof Aziz served as Vice President of IMU since Register. Prof Aziz has also been a member of the 1 November 2013, a role he was promoted to since Malaysian Medical Council (MMC) and has served joining IMU in 1 July 2013 as Vice President with the MMC on several accreditation visits to local and responsibility for the Medical and Dental Programme. foreign medical institutions. Currently he serves as a member of the Joint Technical Committee Before he joined IMU, Prof Aziz held several key of the Malaysian Medical Council, the Executive academic administrative positions at the School of Committee of the National Cancer Council Medical Sciences (SMS) of Universiti Sains Malaysia Malaysia (MAKNA) and the Vice Chancellor's Council (USM). These included the positions of Dean for Private University (VCCPU). (2005–2012) and Deputy Dean (2003–2005). Prof Abdul Aziz Baba Preceding this he served as a Professor (2000), Academic/Professional Associate Professor (1992) and Lecturer and President, IMU Health Sdn Bhd Clinical Haematologist/ Oncologist at USM’s SMS, Qualification(s) following the completion of his postgraduate training • Bachelor of Medicine and Bachelor of Surgery in 1986. During his tenure with USM, Prof Aziz was (MBBS), University of Melbourne, Australia instrumental in establishing the Clinical Haematology • Membership of the Royal Colleges of Physicians of and Stem Cell Transplantation service at USM’s the United Kingdom teaching hospital, HUSM. • Membership of the Royal College of Physicians of Prof Aziz undertook his undergraduate medical Ireland, Dublin training at the University of Melbourne on a • Fellow of the Royal College of Physicians of Nationality: Malaysian Colombo Plan scholarship and graduated in Edinburgh (UK) Age: 63 (As at 3 April 2019) November 1979. He subsequently trained in Internal • Member, Academy of Medicine Malaysia Date of Joining: 1 July 2013 Notes • Does not have any family relationships with any directors and/or any major shareholders of the Company • Does not have any conflict of interest with the Company • Does not have any convictions for offences within the past five years other than for traffic offences, if any

Work Experience Academic/Professional Ms Sharon Teo Fay Lin joined IHH Healthcare Bhd Qualification(s) (“IHH”) on 10 March 2017. She is a Human Resources • Bachelor of Arts in Psychology, Anthropology and practitioner with more than twenty years’ HR Sociology, National University of Malaysia experience across a broad spectrum of • Certificate in Personnel Management, Malaysian pharmaceutical, manufacturing and FMCG MNCs Institute of Personnel Management and local enterprises. • Leadership Versatility Index Certification and Prior to joining IHH, Ms Teo served with Avery Realise2 Accreditation Programme Dennison Singapore Pte Ltd in various positions, • DDI Facilitator Certifications (Leadership beginning as the HR Director for its’ ASEAN business Assessment and Targeted Selection) before leading Integration and Transformation at • 360° Coaching Accreditation and Occupational the East Asia and Pacific level. She was subsequently Climate Survey promoted as the HR Director for the Materials Group at the ASEAN level. Preceding this, Ms Teo held senior positions in pharmaceutical and healthcare MNCs, such as Novartis Asia Pacific Pharmaceutical Pte Ltd, where she served as the Human Resources Manager and Sharon Teo Fay Lin Regional Human Resources Manager, Asia Pacific before being promoted as the Head of Talent Group Chief Human Resources Management, Organization Development and Officer Staffing, Asia Pacific. Prior to that, she served at Bausch & Lomb Sdn Bhd as the Regional Human Resources Administrator, South Asia before rising to the position of Human Resources and Administration Manager, Malaysia and Singapore. Ms Teo began her career at Yeo Hiap Seng (M) Berhad as a Human Resources Executive in 1993. Nationality: Singaporean Age: 50 (As at 3 April 2019) Notes Date of Joining: 10 March 2017 • Does not have any family relationships with any directors and/or any major shareholders of the Company • Does not have any conflict of interest with the Company • Does not have any convictions for offences within the past five years other than for traffic offences, if any

101 Governance GROUP MANAGEMENT

Work Experience Academic/Professional Ms Audrey Huang was appointed the Group Head Qualification(s) of Internal Audit of IHH Healthcare Berhad (“IHH”) • Fellow member of the Association of Chartered on 1 March 2013. In this position, she is responsible Certified Accountants (UK) for managing the internal audit functions of the • Member of the Institute of Singapore Chartered Group’s overall system of internal controls, risk Accountants and governance. • Member of the Malaysian Institute of Accountants Ms Huang brings to the table more than 30 years • Member of the Institute of Internal Auditors, experience in auditing, including external audit Singapore experience with one of the big four accounting firms as well as internal audit experience with various financial institutions. Prior to joining IHH, Ms Huang had served as the Head of Internal Audit of Parkway Pantai Limited following its incorporation on 21 March 2011. Before that, she was Head of Internal Audit of Parkway Holdings Limited from 21 February 2005. Audrey Huang Lok Sen In 2013, she obtained the Certification in Risk Management Assurance (“CRMA”) from the Institute Group Head, Internal Audit of Internal Auditors, Inc USA, thereby strengthening her portfolio of skills.

Nationality: Singaporean Age: 63 (As at 3 April 2019) Notes Date of Joining: 1 March 2013 • Does not have any family relationships with any directors and/or any major shareholders of the Company • Does not have any conflict of interest with the Company • Does not have any convictions for offences within the past five years other than for traffic offences, if any

Work Experience Academic/Professional Ms Nili Shayrina binti Saat has more than 20 years Qualification(s) of experience in Risk Management with broad • Bachelor of Arts (Hons) in Accounting and Finance industry experiences across property development, of Lancaster University, UK constructions, media, oil and gas, hotel, education and agriculture with regional exposure in Indonesia, Thailand, Singapore, India and the Middle East. Prior to joining IHH in 2018, she was the Director of Business Process and Risk Management for Eagle Hills Properties in Abu Dhabi and oversaw the risk management and business process improvement functions. Preceding this she was the Innovation Chief of Iskandar Investment, spearheading the Innovation initiatives for the organisation.

Nili Shayrina binti Saat Head, Risk Management

Nationality: Malaysian Age: 44 (As at 3 April 2019) Notes Date of Joining: 19 November 2018 • Does not have any family relationships with any directors and/or any major shareholders of the Company • Does not have any conflict of interest with the Company • Does not have any convictions for offences within the past five years other than for traffic offences, if any

102 IHH Healthcare Berhad | Annual Report 2018 CORPORATE GOVERNANCE Governance OVERVIEW STATEMENT

OUR COMMITMENT TO GOOD is modelled upon the best practices of The Board is pleased to present this CORPORATE GOVERNANCE the following industry-leading standards: statement pursuant to Paragraph 15.25 At IHH Healthcare Berhad (“IHH” or “the of the MMLR, in respect of the financial • Malaysian Code on Corporate year ended 31 December 2018 Company”), together with its subsidiaries Governance (“MCCG”); (“the Group”), we recognise that building (“CG Overview Statement”). The CG a culture of integrity in today’s highly • Main Market Listing Requirements Overview Statement serves to show how competitive marketplace is vital to the (“MMLR”) of Bursa Malaysia Securities our measures align with the principles ongoing success and sustainability of our Berhad (“Bursa Securities”); and of good governance in accordance with operations. Underpinning the high • Corporate Governance Guide: Moving the MCCG. These comprise: from Aspiration to Actualisation by standards we demand in every aspect of (A) Board Leadership and Effectiveness; our operations is our commitment to the Bursa Securities (“CG Guide”). principles and practice of good corporate (B) Effective Audit and Risk Management; governance. The requisite of good governance is and accountability. At IHH, this begins at (C) Integrity in Corporate Reporting and In addition to delivering sustainable value the top. Our Board is accountable for Meaningful Relationship with and enhancing business integrity, good providing clear and accurate information Stakeholders. governance essentially reciprocates the to our investors, customers, employees, confidence that our investors and other agencies and other stakeholders. The CG Overview Statement shall be stakeholders place in us as we deliver on To further this objective, the Board read together with the Corporate our corporate objectives and vision. subscribes to internal guidelines on Governance Report 2018, which is corporate disclosure policies and available on the Company’s website at The Board of Directors (“Board”), procedures based on the best practices www.ihhhealthcare.com/corporate- Management and staff of the Group recommended by Bursa Securities. governance.html. affirm their commitment to upholding the The Group also abides by the guidelines guidelines, policies and practices of our of the respective regulators and corporate governance framework, which authorities of the various countries in which it operates.

Corporate Governance Framework

Managing Director Corporate Governance Group Management and CEO Guidelines

Audit Committee Internal Audit Corporate functions CG Guide Risk Management Risk Management Committee Operating companies’ Nomination Sustainability management team Companies Act 2016 Committee Management Committee Remuneration MMLR Committee Shareholders

Board of Directors Steering Committee MCCG

Company Secretaries

International Clinical Governance Advisory Council

103 Governance CORPORATE GOVERNANCE OVERVIEW STATEMENT

PRINCIPLE A — BOARD the LOA, the overall management and Board Committees LEADERSHIP AND control of the business and affairs of the Board Committees are set up to manage EFFECTIVENESS Group still vests with the Board. Where specific tasks for which the Board is necessary, the Board shall review the 1. BOARD RESPONSIBILITIES responsible within clearly-defined Terms LOA to tailor to the Group’s operating of Reference (“TOR”). This ensures that The Board is elected to oversee the environment. The LOA was last reviewed the members of the Board can spend management of the business and affairs by the Board in August 2018. their time more efficiently while the of IHH and the Group as a whole, with the Board Committees are entrusted with goal of enhancing long-term shareholder Whistleblowing Policy the authority to examine particular issues. value and contributing to the success of It is in the interest of our stakeholders the Company. The Board makes major that we maintain confidence in the The Board has to date established the policy decisions, participates in strategic integrity of the operations of IHH and its following Board Committees: planning, reviews the performance and major operating subsidiaries. We have effectiveness of the Management and established a confidential reporting • Audit Committee (“AC”) ensures overall accountability for the procedure that enables employees to • Risk Management Committee (“RMC”) Group’s growth. raise concerns to prevent or deter • Nomination Committee (“NC”) improper activities. The Whistleblowing Each member of the Board is expected to • Remuneration Committee (“RC”) Policy also ensures that whistleblowers act with a view towards the best interests • Steering Committee (“SC”) of the Company. The Board is also are protected from retaliation or reprisal as a result of making the information mandated to assess the effectiveness The TOR of the relevant Board Committees known in good faith. of the Board as a whole, its committees are available on the Company’s website and the contributions of individual Any concern about unethical behaviour at www.ihhhealthcare.com. Directors. The Board believes that the or serious misconduct should first be Company’s governance system is raised with the immediate superior or Audit Committee effective with appropriate structures respective Human Resource department The AC assists the Board in fulfilling its and procedures in place. where possible, or via email to statutory and fiduciary responsibilities [email protected]. relating to the monitoring and Board Charter Alternatively, employees may choose management of financial risk processes The Board Charter lists out the principles to write in confidence directly to the along with its accounting practices, for the operation of the Board, whose MD & CEO of IHH. Where reporting to system of internal controls as members are stewards of the Company. It Management is a concern, the report well as the management and financial describes the functions of the Board should be made in confidence to the reporting practices of the Group. To and Board Committees and those Chairman of IHH. achieve these, the AC oversees the functions delegated to Management reports of external and internal auditors of the Company. Read about our Whistleblowing Policy at and safeguards the integrity of financial www.ihhhealthcare.com/corporate- reporting, as well as ensures a sound The Board Charter is available for governance.html. system of internal controls to safeguard reference on the Company’s website at and enhance enterprise value. It also www.ihhhealthcare.com/corporate- Division of Roles and oversees the implementation of the governance.html. Responsibilities between the Whistleblowing Policy for the Group. Chairman and the MD & CEO The Board shall review the Board Charter At IHH, the roles and responsibilities of The composition and the summary of as and when it deems fit to ensure its meetings attended by the AC members, applicability to the Company’s operating the Chairman and MD & CEO are separated and clearly defined. The as well as the work carried out by the environment. The Board Charter was AC, are set out separately in the AC last reviewed by the Board in May 2016. Chairman is responsible for the leadership of the Board and is Report as laid out on pages 121 to 125 of this Annual Report. Limits of Authority instrumental in creating the necessary The Limits of Authority (“LOA”) are a set conditions inside and outside the of authority limits for the Board, Board boardroom. The Chairman promotes and Committees, Managing Director & Chief oversees the highest standards of Executive Officer (“MD & CEO”) and corporate governance within the Board Senior Management personnel, which are and Company. The MD & CEO in compliance with the principles of good undertakes the day-to-day management corporate governance. Although the of the Company, in line with the strategy operations of the Group are governed by and objectives approved by the Board.

104 IHH Healthcare Berhad | Annual Report 2018 Governance

Risk Management Committee Steering Committee • overseeing and evaluating the The RMC assists the Board in ensuring The SC functions to assist the Board in conduct of the Group’s businesses; the implementation of effective risk reviewing the Group’s long-term and • identifying top tier risks and ensuring management processes for the Group short-term strategies, evaluating major the implementation of appropriate and clinical governance to ensure the transactions, material borrowings, any systems to manage these risks; delivery of high quality and safe patient investment projects, broad procurement • establishing succession plans; care across the Group. Its role includes strategy and procurement and tender • establishing and implementing a reviewing the management in key risks processes that any of the Group entities good Investor Relations programme and clinical quality indicators across the may undertake. and shareholders’ communication Group’s operations in different policy; and jurisdictions and ways to improve and The SC comprises the following enhance the clinical quality. members: • reviewing the adequacy and the Chairman: Dato’ Mohammed Azlan bin integrity of the Group’s internal The composition and the summary of Hashim control and management information meetings attended by the RMC members, Members: Dr Tan See Leng systems. as well as the work carried out by the Chintamani Aniruddha Bhagat RMC, are set out separately in the RMC The Board held its Board Retreat (“BR”) Report as laid out on pages 126 to 127 Takeshi Saito in October 2018 to discuss the strategic of this Annual Report. Quek Pei Lynn intent of the Group moving forward. The (Alternate to Chintamani BR was attended by a majority of Board Nomination Committee Aniruddha Bhagat) members, Senior Management and the relevant Heads of Department of the The NC plays a key role in the oversight Group. At the BR, the Board discussed of the nomination and selection process Company Secretaries the strategic plans to deliver growth of the Board members and Senior The Board has ready and unrestricted outcomes for the Group. The BR included Management, assesses and monitors access to the advice and services of presentations from external consultants the composition and effectiveness of the the Company Secretaries. The Company on, among others, enhancements to Board and undertakes development Secretaries support the Board in its clinical governance and quality care, as needs and succession planning initiatives leadership role, discharge of fiduciary well as the operating model of the future. for the Board and the Group as a whole. duties and as stewards of governance. The outcome of the BR saw both the They provide an important advisory The composition and the summary of Board and Management establishing a role to the Board on issues relating to meetings attended by the NC members, shared understanding of the Group’s corporate governance and compliance as well as the work carried out by the strategic goals, objectives and actions with applicable statutory and regulatory NC, are set out separately in the NC moving forward. rules. Report as laid out on pages 114 to 118 The Board is committed to acting in the of this Annual Report. Summary of Board Activities in best interests of the Group and its Remuneration Committee the Financial Year 2018 shareholders by exercising due diligence and care in discharging its duties and The RC is responsible for recommending Pursuant to the Board Charter, the responsibilities to ensure that high ethical and reviewing remuneration policies, Board, among others, assumed the standards are applied at all times. We the remuneration framework and following roles and responsibilities undertake this through compliance with performance measures of individual during the financial year 2018, which the relevant rules, regulations, directives Directors and the Senior Management. are discharged in the best interests of the Company in pursuance of regulatory and guidelines, in addition to adopting The composition and the summary of and commercial objectives: the best practices in the MCCG and meetings attended by the RC members, CG Guide. as well as the work carried out by the • reviewing and setting the strategic RC, are set out separately in the RC direction of the Group including Report as laid out on pages 119 to 120 evaluating acquisition opportunities of this Annual Report. which fit into the Group's overall strategy;

105 Governance CORPORATE GOVERNANCE OVERVIEW STATEMENT

Meeting Attendance During the financial year under review, the Board met 15 times. The details of the attendance of the Board members are as follows:

Director Designation Total Meetings Attended Dato’ Mohammed Azlan bin Hashim Chairman, 1 5/1 5 (Re-designated as Independent Non-Executive Independent Non-Executive Director Director on 27 November 2018) Dr Tan See Leng Managing Director and Chief Executive Officer, 1 5/1 5 Non-Independent Executive Director Mehmet Ali Aydinlar Non-Independent Non-Executive Director 9/1 5 (ii) (Re-designated as Non-Independent Non-Executive Director on 1 March 2019) Chintamani Aniruddha Bhagat Non-Independent Non-Executive Director 1 2/1 5 (i) Koji Nagatomi Non-Independent Non-Executive Director 1 1/1 5(i) (ii) Chang See Hiang Senior Independent Non-Executive Director 1 5/1 5 Rossana Annizah binti Ahmad Rashid Independent Non-Executive Director 1 4/1 5 Shirish Moreshwar Apte Independent Non-Executive Director 1 4/15 (ii) Jill Margaret Watts Independent Non-Executive Director 9/ 1 1 (ii) (Appointed on 4 April 2018) Takeshi Saito Non-Independent Non-Executive Director 1 2/1 5 (i) (ii) (Ceased as the Alternate Director to Koji Nagatomi and appointed as Non-Independent Non-Executive Director on 28 March 2019) Quek Pei Lynn Non-Independent Non-Executive Director 1 2/1 5 (i) (Alternate Director to Chintamani Aniruddha Bhagat) Kuok Khoon Ean Independent Non-Executive Director 7/8 (ii) (Retired on 28 May 2018) Notes: Directors did not participate in certain meetings held during the financial year due to: (i) conflict; and (ii) scheduling conflict in respect of the ad-hoc meetings convened by way of short notice.

2. BOARD COMPOSITION The Board, as at the date of this CG Based on the recommendation of the Our Board consists of individuals of Overview Statement, consists of eleven NC, the Board has re-designated different backgrounds, academic members out of which, five members are Dato’ Azlan as INED with effect from qualifications, experience, knowledge Independent Non-Executive Directors 27 November 2018. (“INED”), including the Chairman. Following and skills. This allows the Board as A Senior INED, to whom concerns from a whole to draw on a diverse yet the cessation of Dato’ Mohammed Azlan bin Hashim (“Dato’ Azlan”) as a nominee the other Directors, the public or investors balanced group of individuals to may be conveyed, has also been provide insights, perspectives and director of Khazanah Nasional Berhad, a major shareholder of the Company, with identified. Inquiries or complaints about independent judgement to lead and decisions or actions taken by the Group steer the business of the Group. effect from 7 November 2018, the NC has made an assessment on Dato’ Azlan should be addressed to the Senior INED Independent Directors and recommended the re-designation via email at [email protected]. Independent Directors are appointed to of Dato’ Azlan as an Independent To date, none of our INEDs have ensure objectivity to the oversight Non-Executive Chairman of the Company exceeded a cumulative term of nine years. function of the Board and evaluate the based on the following justifications: However, the nine-year tenure of two performance and well-being of the (i) Dato’ Azlan has fulfilled the Company without having any conflict of our INEDs will approach in 2021. As “independent director” criteria as such, our NC and Board will commence of interest or undue influence. They act stipulated under the MMLR; and independently of Management and a careful evaluation to determine the (ii) Dato’ Azlan is independent of are free from any business or other retainment of these INEDs. The Board management and free from any relationships that could interfere with the will comply with the recommendation of business or other relationship which exercise of independent judgement or the MCCG, which states that the tenure could interfere with the exercise of the ability to act in the best interests of of an independent director should not independent judgement or the ability the Company. exceed a cumulative term of nine years to act in the best interests of IHH.

106 IHH Healthcare Berhad | Annual Report 2018 Governance

unless shareholders’ approval is obtained considered in determining the optimum Annual Evaluation for such director to be retained as an composition of the Board. The criteria, The Board, through the AC and NC independent director or to continue process and requirements to be respectively, had conducted the annual to serve on the board subject to undertaken by the NC and Board in evaluation on the effectiveness of the the director’s re-designation as a discharging their responsibilities in Board, Board Committees, individual non-independent director. terms of nomination, assessment and Directors (including INEDs), MD & CEO, re-election of the Board members are Diversity Policy Group Chief Financial Officer (“GCFO”) set out in the Policy on Nomination and and external and internal auditors. This The Company recognises that a Board Assessment Process of Board Members was facilitated internally by the Company comprising individuals of diverse adopted by the Company. Besides the Secretaries/Human Capital Management. backgrounds and perspectives, serving above, the Company has also adopted The evaluation was conducted in the a common purpose, is a compelling a Boardroom Diversity Policy which form of self-evaluation, evaluation by competitive advantage for the Company. sets out the approach to diversity on the NC and one-on-one sessions with the The Board leverages the strengths of the the Board including gender, age and NC Chairman. differences in skills, regional and industry ethnic diversity. experience, background, age, race, The following are the points of gender and other qualities of our Read about our Boardroom Diversity assessment for the Board, Board Directors in maintaining a competitive Policy at www.ihhhealthcare.com/ Committees and individual Directors: advantage. These differences are corporate-governance.html.

Board Board Committees Individual Directors

• Board composition and structure • Composition and experience of • Fit and proper • Dynamics and culture members • Contributions and performance • Operations • Fulfilment of objectives in line with • Continuous development their respective TORs • Partnership with the Executive Team • Affirmation of Independence • Effectiveness and efficiency of the • Meeting administration and (for INEDs) decision-making process continuous development • Quality of information communicated • Effectiveness of the Board Chairman to the Board • Effectiveness of the Board Committees’ Chairmen

The Board, having reviewed the professionalism, integrity and (e) each of the Directors, including performance of the respective persons/ knowledge of the industry and are the MD & CEO, has the character, parties from the evaluation findings, is financially literate; experience, integrity, competence satisfied that: (c) the NC, RC and RMC have and time to effectively discharge consistently performed well during his or her respective roles; (a) the Board and Board Committees the financial year and discharged (f) the GCFO has the character, are effective as a whole, considering their respective duties and experience, integrity, competence the required mix of skills, size and responsibilities satisfactorily in and time to effectively discharge composition, experience, integrity, accordance with their TORs under his role; and core competencies, time committed the chairmanship of the NC, RC and and other qualities in carrying out (g) the external auditors, KPMG PLT, RMC Chairmen respectively; their duties and responsibilities to have discharged their duties steer the Group; (d) the five INEDs of the Company are independently, as well as adopted independent from the management an objective approach in their audit (b) the AC has consistently performed and free from any business or other process. The Board considered the well during the financial year and relationships which could interfere performance of KPMG PLT and was discharged its duties and with the exercise of independent satisfied with KPMG PLT’s calibre responsibilities satisfactorily in judgement. The INEDs have and hence, recommended that upholding the integrity of financial continuously brought independent KPMG PLT be re-appointed as the reporting and managing financial risks and objective judgement to the Board external auditors of the Company in accordance with its TOR. The AC deliberations; for the financial year ending members have sound judgement, 31 December 2019. objectivity, an independent attitude,

107 Governance CORPORATE GOVERNANCE OVERVIEW STATEMENT

Based on the assessment of the Directors’ Training the details of the training attended by the individual Directors seeking re-election The Company encourages all Directors Directors. at the forthcoming Ninth Annual General to attend appropriate programmes, Jill Margaret Watts, who was appointed Meeting (“AGM”) of the Company, and courses and seminars to stay abreast of as an INED of the Company on at the recommendation of the NC, relevant business development and the 4 April 2018, attended the Mandatory the Board has recommended for the outlook in the industry and marketplace, Accreditation Programme (MAP) on shareholders to vote in favour of the locally and abroad. relevant resolutions with regard to the 23 – 24 July 2018. re-election of the Directors as stipulated The organisation of such programmes is The training programmes attended by in the Notice of Ninth AGM. facilitated by the Company Secretaries. the Directors during the financial year The Company Secretaries also maintain 2018 are as follows:

Director List of Training, Conferences, Seminars, Workshops Attended Dato’ Mohammed Azlan (i) Gleneagles Hong Kong Operation Tour (v) SingHealth Duke — NUS Scientific bin Hashim (ii) Labuan International Business and Congress Financial Centre Asian Captive Conference (vi) Asian Healthcare Leadership Summit 2018 2018 — Innovation, Entrepreneurship & (iii) Update on Malaysian Corporate Disruption in Healthcare Governance 2017 (vii) Global Islamic Finance Forum (iv) Future Products & Application — Smart RGB (viii) IHH Quality Summit LED — Automotive Interior Trend — RGB (ix) IHH Board Retreat Ambient Lighting

Dr Tan See Leng (i) 36th Annual JP Morgan Healthcare (viii) GIC Insights 2018 — The New China Conference Economy (ii) Master Class in Liver Disease Forum (ix) Bloomberg New Economy Forum (iii) Honour International Symposium 2018 (x) Acibadem Maslak Hospital Tour (iv) IHH Quality Summit (xi) Singapore Ministerial Conference on (v) Khazanah Megatrends Forum Diabetes 2018 th (vi) South China Morning Post — China (xii) 15 Confederation of Indian Industry Conference Health Summit 2018: Indian Healthcare — A Changing Paradigm (vii) IHH Board Retreat

Mehmet Ali Aydinlar (i) Sector Meetings 7 — Clinical Trials (ii) IHH Board Retreat

Koji Nagatomi (i) Could We Believe in the Healthcare (ii) Healthcare System and Nursing Care Information? — Prevention of Cancer and System in Japan — The Impact of Medical Research of Epidemiology Treatment Fee Revision in 2018 (iii) IHH Board Retreat

Chintamani Aniruddha (i) 36th Annual JP Morgan Healthcare (vii) Asian Healthcare Leadership Summit 2018 Bhagat Conference (viii) Khazanah Megatrends Forum (ii) Focusing Capital on the Long-Term Summit (ix) IHH Board Retreat 2018 (x) Acibadem Maslak Hospital Tour (iii) India Today Conclave (xi) Khazanah Nasional Berhad Board Retreat (iv) HBI Summit 2018 (xii) 15th CII Health Summit (v) HT-MintAsia Leadership Summit (vi) Milken Institute 2018 Asia Summit

Chang See Hiang (i) IHH Board Retreat

108 IHH Healthcare Berhad | Annual Report 2018 Governance

Director List of Training, Conferences, Seminars, Workshops Attended Rossana Annizah binti (i) Gleneagles Hong Kong Operation Tour (v) Khazanah Megatrends Forum Ahmad Rashid (ii) EPF International Social Security (vi) Bursa Malaysia Independent Directors Conference Programme “The Essence of (iii) EPF Global Private Equity Summit 2018 Independence” (iv) IHH Quality Summit (vii) Acibadem Maslak Hospital Tour

Shirish Moreshwar Apte (i) 36th Annual JP Morgan Healthcare (ii) IHH Board Retreat Conference (iii) Acibadem Maslak Hospital Tour

Jill Margaret Watts (i) Mandatory Accreditation Programme (iii) World Innovation Summit for Health (ii) IHH Board Retreat

Takeshi Saito (i) Could We Believe in the Healthcare (ii) IHH Board Retreat Information? — Prevention of Cancer and (iii) Acibadem Maslak Hospital Tour Research of Epidemiology

Quek Pei Lynn (i) 36th Annual JP Morgan Healthcare (v) Managing Crucial Conversation — Part 2: (Alternate Director to Conference Leadership Conversation — With Chintamani Aniruddha (ii) In-house Programme: License to Hire Stakeholders/Staff Bhagat) (iii) Managing Crucial Conversation — Part 1: (vi) IHH Quality Summit Board Conversations (vii) Khazanah Megatrends Forum (iv) In-house Programme: Saville Assessment (viii) IHH Board Retreat International Accreditation Workshop

The Board, through the NC, also manage the Group successfully. The The Non-Executive Directors’ ("NEDs") assessed the training needs of its remuneration packages have been remuneration package reflects the Directors by referring to the list of carefully aligned with industry practices, merits, valuable contribution and level trainings attended by each of the taking into account the appropriate of responsibilities undertaken by Directors during the financial year under calibre of each talent, while upholding the individual NED. The Board review. The Board was satisfied that the the interests of our shareholders. determines the fees payable to training attended by the Directors in year NEDs, and individual Directors do 2018 was appropriate and aided the The Executive Directors’ remuneration not participate in decisions regarding Directors in the discharge of their duties. package is designed in such a way their own remuneration package. The Directors were encouraged to attend that it links the rewards to corporate relevant training programmes to enhance and individual performance. The RC their ability in discharging their duties and is responsible for reviewing and responsibilities as Directors. recommending to the Board the policy and framework of the Directors’ 3. REMUNERATION remuneration and the remuneration As the Company grows, we believe in package for our Executive Directors. In appropriate remuneration for our talents the process, the RC may receive advice by aligning pay and performance against from external consultants for the the key strategic drivers of our long-term recommendation of the Group’s growth. Our policy on Directors’ remuneration policy. The Board takes remuneration serves to attract, retain the ultimate responsibility of approving and motivate capable Directors to the remuneration of these Directors.

109 Governance CORPORATE GOVERNANCE OVERVIEW STATEMENT

The details of aggregate remuneration of Directors for the financial year ended 31 December 2018 are as follow:

Company Subsidiaries Bonus, Bonus, Incentives Benefits- Incentives Benefits- Group Salaries Fees & Others in-kind Salaries Fees & Others in-kind Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Executive Directors Dr. Tan See Leng 2,248 – 21,823 79 2,349 – 9,530 146 36,175 Mehmet Ali Aydinlar – – – – 866 2,065 4,788 – 7,719 (Re-designated as Non-Independent Non-Executive Director on 1 March 2019) Total 2,248 – 21,823 79 3,215 2,065 14,318 146 43,894 Non-Executive Directors Dato’ Mohammed – 832 – 25 – 128 – – 985 Azlan bin Hashim (Re-designated as Independent Non-Executive Director on 27 November 2018) Chintamani Aniruddha Bhagat1 – 476 – – – 150 – – 626 Koji Nagatomi1 – 295 – – – – – – 295 Chang See Hiang – 556 – – – 28 – – 584 Rossana Annizah binti Ahmad – 656 – – – 211 – – 867 Rashid Kuok Khoon Ean – 140 – – – – – – 140 (Retired on 28 May 2018) Shirish Moreshwar Apte – 631 – – – 91 – – 722 Jill Margaret Watts – 337 – – – – – – 337 (Appointed on 4 April 2018) Takeshi Saito1 – 70 – – – 78 – – 148 (Ceased as the Alternate Director to Koji Nagatomi and appointed as Non-Independent Non-Executive Director on 28 March 2019) Quek Pei Lynn1 – – – – – 40 – – 40 (Alternate Director to Chintamani Aniruddha Bhagat) Total 2,248 3,993 21,823 104 3,215 2,791 14,318 146 48,638 1. Fees for representatives of Pulau Memutik Ventures Sdn Bhd and Mitsui & Co., Ltd on the Board are directly paid to Khazanah Nasional Berhad and Mitsui & Co., Ltd, respectively.

Senior Management’s The Company's remuneration policy is achievements of the key performance Remuneration based on competitive and market-aligned indicators (KPIs) of the Group’s Balanced guidelines, taking into account the Scorecard, which was approved by the There is a guideline and policy in place different levels of Senior Management Board at the beginning of the financial which defines the pay range (based on according to roles, responsibilities and year. This ensures that the remuneration market data) of different levels of senior levels of accountability. packages for our Senior Management management according to a job grade are fair, equitable and competitive and structure. A review of the job grade The Board determines all bonuses and commensurate with their individual structure has been undertaken to enable share-based payments, at the performance, taking the Group’s consistent adoption and application recommendation of the RC. This is performance into consideration. across the Group. done after reviewing the individual performance appraisals and

110 IHH Healthcare Berhad | Annual Report 2018 Governance

PRINCIPLE B — EFFECTIVE constructive observations, recognise The RMC comprises four INEDs from AUDIT AND RISK implications and make recommendations diverse backgrounds, from healthcare to MANAGEMENT in areas needing improvement, banking and finance, legal and corporate particularly with respect to the governance. These appointed members 1. AUDIT COMMITTEE organisation’s internal control system have been carefully chosen for their The Group undertook a restructuring over financial reporting. sound judgement, objectivity, integrity, exercise in the previous financial year, management experience and keen involving the Board and Board Oversight of Financial Reporting knowledge of the industry. Committees across the Group to, among The Board, assisted by the AC, oversees others, simplify and streamline the financial reporting processes and the The Board is of the view that the system the overall governance structure of the quality of the financial reporting by the of internal control and risk management Group. Consequential thereto, the Group. The AC reviews the quarterly in place during the financial year 2018 is Audit and Risk Management Committee financial results and audited financial sound and sufficient to safeguard the (ARMC) was split into an AC and an RMC, statements which are then approved by Group’s assets and shareholders’ respectively with effect from 1 July 2018. the Board before their release to Bursa investments, as well as the interests of Securities and Singapore Exchange customers, regulators, employees and The audit and internal control functions other stakeholders. are undertaken by the AC. The AC Securities Trading Limited (“SGX”). comprises four INEDs from diverse Please refer to the following reports/ Please refer to the AC Report, RMC backgrounds with extensive experience statements as contained in this Annual Report and Statement on Risk in healthcare, banking and finance, legal Report for further details: Management and Internal Control as laid and corporate governance. out on pages 121 to 125, pages 126 to • Directors’ Responsibility Statement 127 and pages 128 to 134 respectively of Review of External Auditors for the audited financial statements this Annual Report for further details on In line with market practice, the Company of the Company and the Group on the risk management and internal control performs a major review of our external page 140; framework of the Group. auditors every five years. Management • Company and the Group financial Internal Audit assesses the experiences, capabilities, statements for financial year ended audit approach and independence of the 31 December 2018 on pages 142 to A key duty of the AC is to oversee audit firms we engage, and subsequently 297; and the Company’s internal controls. The recommends their appointment or independent internal audit function of • AC Report on pages 121 to 125. reappointment to the AC for approval. the Group is an important resource to help carry out this responsibility. The On an annual basis, Management will 2. RISK MANAGEMENT AND INTERNAL CONTROL Group’s Internal Audit function is review the service levels of the auditors, undertaken in-house (excluding the FRAMEWORK agree on amendments to their scope of IMU Group) and reports directly to the work to address new developments in Organisations worldwide face a wide AC. The internal audit function of Fortis the business and recommend their range of uncertain internal and external Healthcare Limited Group, which is reappointment to the AC. All major factors that may affect the achievement acquired in November 2018, is non-audit services proposed by the of their objectives. Risk Management undertaken in-house and supported by auditors are presented to the AC to focuses on identifying threats and outsourced independent internal audit determine if the auditors’ independence opportunities, while Internal Control firms. The Group’s Internal Audit is will be compromised. helps counter threats and takes guided by international standards and advantage of opportunities. Recognising professional best practices of Internal The annual evaluation of the external the importance of these roles, the Audit. The Group Internal Audit uses auditors is also carried out via evaluation Company established the RMC to structured risk-based and strategic-based forms by the MD & CEO, GCFO, the oversee the Group’s overall risk approaches to develop its strategic internal auditors and the AC. The review management framework and quality audit plan, which is reviewed and measures areas including objectivity and delivery of the Group's medical services, approved by the AC annually. independence, technical competence with the assistance of the International and ability, understanding of IHH Group’s Clinical Governance Advisory Council The internal audit function is further businesses and industry, resources (ICGAC). disclosed in the AC Report and Statement assigned and capability of the on Risk Management and Internal Control engagement partner and engagement on pages 121 to 125 and pages 128 to 134 team, as well as the ability to provide respectively of this Annual Report.

111 Governance CORPORATE GOVERNANCE OVERVIEW STATEMENT

PRINCIPLE C — INTEGRITY IN In view of the Company’s dual listing During the AGM, queries raised by the CORPORATE REPORTING AND status, we are obliged to adopt the Minority Shareholder Watchdog Group MEANINGFUL RELATIONSHIP MCCG and Singapore Code of Corporate (MSWG) on IHH’s business or other WITH STAKEHOLDERS Governance, as well as the disclosure pertinent governance issues raised obligations under the MMLR and the prior to the meetings, and feedback, 1. COMMUNICATION WITH Mainboard Rules of SGX, where are shared with all shareholders. In STAKEHOLDERS applicable, in all of our communications. addition, the results of the voting of Regular communication is a key thrust each resolution are immediately to building confidence between the Please refer to pages 30 to 33 of this announced after the voting process. Group and its stakeholders, shareholders Annual Report for more about how the and the investing community at large. Company engages our key stakeholders The Notice and agenda of the AGM, Management is committed to provide and pages 136 to 137 of this Annual together with the Form of Proxy, are information that accurately and fairly Report for our Investor Relations Report given to shareholders at least 28 days represents the Group to ensure our section on shareholder engagement. prior to the AGM. This gives shareholders stakeholders have clear insights into the sufficient time to prepare to attend or Group’s strategy and financial performance. 2. CONDUCT OF appoint a proxy or proxies to attend and GENERAL MEETINGS vote on their behalf. Each item of special AGM business included in the Notice of AGM is accompanied by an explanatory IHH regards accountability as a key value statement for the proposed resolution The Company ensures that its for our stakeholders and shareholders. to facilitate the full understanding and communication with various Shareholders are invited to attend our evaluation of the issues involved. stakeholders through various means AGM, the Group’s principal platform for complies with the following criteria: meaningful dialogue between private The Company has also implemented an and institutional shareholders with the electronic poll voting at the AGM. These Board and Management of the Group. votes are validated by an independent This platform also offers the opportunity scrutineer engaged by IHH. for the Group to obtain constructive and valuable feedback from IHH's All Directors and Senior Management Transparent shareholders. attend and are available at the AGM Information will be released to address shareholders’ questions Before proceeding with the agenda of in a balanced and fair relating to functions and activities the AGM, the MD & CEO presents to manner within their purview, unless another the shareholders the operational and pressing commitment precludes them financial performance of the Group from doing so. during the year under review and an Accurate overview of the growth strategies A summary of the key matters discussed of the Group moving forward. This at the general meetings will be published Information should be accords our shareholders with a better on IHH’s corporate website as soon as complete and accurate understanding of their investment. practicable after the conclusion of the when released general meeting. IHH values the feedback and input from our stakeholders. Shareholders are encouraged to participate in the Consistent and Timely proceedings. We ensure sufficient time All stakeholders will is provided for shareholders to ask receive the same questions on the Group’s performance, information through broad and on any resolutions proposed, with public dissemination, the Management on site to address which is made as and concerns raised by our shareholders. when possible

112 IHH Healthcare Berhad | Annual Report 2018 Governance

KEY FOCUS AREAS AND COMPLIANCE STATEMENT FUTURE PRIORITIES IHH’s corporate governance (CG) Moving forward, the Company will structure is central to the operation continue working towards achieving of the Board and the Group, and higher standards of corporate governance. maintaining its high standards is To achieve this objective, the Board has critical for our sustainable growth. identified the following key focus areas and future priorities in relation to the In this vein, we continuously explore corporate governance practices. new measures to refine the Company’s governance framework to improve 1. Woman Representation on Board our system of policies and procedures At the end of the financial year, the Board to meet the expectations of our comprised three women Directors, one stakeholders. We strive towards a model of whom is an Alternate Director, which of governance that reflects our culture represents approximately 27% of the of performance, compliance and Board composition. accountability. We are committed to strengthening the Group’s position and The Board does not specify a target for status as a key healthcare provider in boardroom diversity as the appointment Malaysia and the world. of Board members should be based on objective criteria and merit and with The Board has reviewed, deliberated due regard for diversity. upon and approved this CG Overview Statement and the Corporate Nevertheless, the Board remains Governance Report 2018 in line with committed in its efforts to source for the principles and recommendations and increase women representation of the MCCG and in accordance with on the Board by 2021 depending on the resolution of the Board, dated the availability of the right candidates. 28 March 2019.

2. Board Independence At the end of the financial year, the Board comprised five INEDs, which represents approximately 56% of the current Board composition, post the re-designation of Dato’ Mohammed Azlan bin Hashim as INED in November 2018. The Independent Directors further reinforce the objectivity and impartiality of the Board. The Board believes the current board composition provides the appropriate balance in terms of skills, knowledge, experience and independent elements to promote the interests of all shareholders and to govern the Group effectively.

The Board acknowledges that promoting good corporate governance practices is an ongoing process and as such, the Board will continuously assess and implement relevant measures to safeguard the Board’s independence in the long-term whilst simultaneously ensuring it remains dynamic and in line with the needs of the Group.

113 Governance NOMINATION COMMITTEE REPORT

The Nomination and Remuneration Committee (“NRC”) was established on 18 April 2012 in line with the Malaysian Code on Corporate Governance (“MCCG”). Bursa Malaysia Securities Berhad (“Bursa Securities”) had amended the Main Market Listing Requirements (“MMLR”) mandating the establishment of a nominating committee by all the listed issuers with effect from 1 June 2013. On 1 July 2018, the NRC was split into a Nomination Committee (“NC”) and Remuneration Committee (“RC”), respectively.

ROLES OF THE NC In carrying out its duties and During the year under review, NRC The NC is primarily to assist the Board responsibilities, the NC has the membership was reduced to four in fulfilling its fiduciary responsibilities following authorities: following the retirement of Kuok Khoon Ean as Independent Non-Executive relating to the review and assessment • Perform the activities required to of the nomination and selection Director of the Company after the close discharge its responsibilities and of the Eighth Annual General Meeting process of Board members and Senior make recommendations to the Board; Management, review of Board and Senior (“AGM”) in May 2018. • Select, engage and seek approval Management succession plans and talent Based on the analysis/findings of the management, assessment of the Board, from the Board (within the Group’s Limits of Authority) for fees for performance evaluation of the NC, its Committees and each individual the Board is satisfied that the NC Director's performance, as well as professional advisers that the NC may require to carry out its duties; has consistently performed well and evaluation of the training and development discharged its duties and responsibilities • Have full and unrestricted access to needs of the Board members. satisfactorily in accordance with its information, records, properties and TOR under the chairmanship of the The NC is governed by a clearly defined employees of the Group; and NC Chairman. and documented Terms of Reference • Have access to the advice and (“TOR”). The NC’s TOR is reviewed and services of the Company Secretary. The NRC/NC met eight times during the updated from time to time, as the need year under review. The composition of arises, to ensure that it remains relevant COMPOSITION AND MEETINGS the NRC/NC and the attendance record and up-to-date to be in line with the The NC is comprised exclusively of of its members for the year under review Group’s policies and various changes in are as follows: regulations. The TOR of the NC was Non-Executive Directors, a majority of revised and approved by the Board for whom are independent and represent an adoption with effect from 1 July 2018 appropriate balance and diversity in light of the splitting of the NRC. of skills, experience, gender The TOR of the NC is accessible for and knowledge. reference on the Company’s website at www.ihhhealthcare.com.

Director Designation Total Meetings Attended Shirish Moreshwar Apte Independent Non-Executive Director 8/8 (Chairman) Chang See Hiang Senior Independent Non-Executive Director 8/8 (Member) Rossana Annizah binti Ahmad Rashid Independent Non-Executive Director 8/8 (Member) Chintamani Aniruddha Bhagat Non-Independent Non-Executive Director 6/6 (Member) (Appointed on 1 March 2018) Dato’ Mohammed Azlan bin Hashim Chairman, Independent Non-Executive Director 2/2 (Member) (Resigned on 1 March 2018) Kuok Khoon Ean Independent Non-Executive Director 3/4 (Member) (Retired on 28 May 2018)

114 IHH Healthcare Berhad | Annual Report 2018 Governance

The NRC/NC meetings were attended by (d) Assessed and evaluated the training (l) Deliberated and recommended to the Managing Director & Chief Executive needs of its Directors to ensure the the Board for approval, the renewal of Officer (“MD & CEO”) and Group Chief Directors kept abreast of regulatory the contract/job expansion of Senior Human Resource Officer together with changes, other developments and Management of the Group and other consultants engaged on particular broad business trends; their corresponding compensation subject matters, upon invitation, to brief (e) Recommended the re-election of package upon taking into the NC on pertinent issues. Directors at the Eighth AGM to the consideration their length of service, Board for consideration after taking professionalism, performance and Minutes of the NC meetings would be into account the composition of the competence; circulated to all members for comments Board and the required mix of skills, (m) Deliberated and recommended to the and extracts of the decisions made by as well as the experience and Board for approval, the composition the NC would be escalated to relevant contributions of the individual of the Board and Board Committees process owners for action. The Chairman Directors, based on the assessment of all operating legal entities within of the NC would provide a report conducted for the year 2017; the Group; and highlighting significant points of the decisions and recommendations made (f) Reviewed and recommended to the (n) Reviewed and recommended to the by the NC to the Board and significant Board for approval, the NRC Report Board for approval, the TOR of the matters reserved for the Board’s approval for inclusion in the Annual Report NC in light of the splitting of the NRC would be tabled at the Board meetings. 2017; into an NC and RC respectively. The NC may call for ad-hoc meetings as (g) Reviewed and recommended to the Subsequent to the financial year ended and when necessary to follow through on Board for approval, the appointment 31 December 2018, the NC carried out the necessary actions post the Board’s of the Group Chief Operating Officer the following activities: decision or to discuss matters which and renewal of the contract for the require urgent decisions. Urgent matters Group Chief Financial Officer; (a) Reviewed the results/findings of the which require the NC’s decision may also (h) Reviewed and deliberated on the performance evaluation of the Board be sought via circular resolutions together Group’s succession planning and as a whole, Board Committees, with the proposals containing relevant talent development; individual Directors and Independent information for their consideration. (i) Reviewed, deliberated and Directors in accordance with the performance evaluation criteria set SUMMARY OF ACTIVITIES recommended to the Board for approval, the re-designation of out in the Corporate Governance During the financial year, the NC carried Dato’ Mohammed Azlan bin Hashim Guide – 3rd Edition: Moving from out the following key activities: as Independent Non-Executive Aspiration to Actualism by Bursa Director of the Company following Securities, for the year 2018; (a) Reviewed the results/findings of the the cessation of Dato’ Mohammed (b) Assessed the NC’s composition, performance evaluation of the Board Azlan bin Hashim as a nominee performance, quality, skills, as a whole, Board Committees, director of Khazanah Nasional Berhad, competencies and effectiveness as individual Directors and Independent an indirect major shareholder of well as their accountability and Directors in accordance with the the Company, with effect from responsibilities for the year 2018; performance evaluation criteria set 7 November 2018; out in the Corporate Governance (c) Undertook an assessment to review Guide – 3rd Edition: Moving from (j) Reviewed and recommended to the the term of office and evaluate the Aspiration to Actualism by Bursa Board for approval, the appointment AC’s overall performance and each of Securities, for the year 2017; of the Head of Risk Management of its members in discharging its duties IHH and Country Chief Executive and responsibilities in accordance (b) Assessed the NRC’s composition, Officer for the Greater China with its TOR; performance, quality, skills, Operations Division; competencies and effectiveness, as (d) Assessed and evaluated the training well as their accountability and (k) Reviewed, deliberated and needs of its Directors to ensure the responsibilities for the year 2017; recommended to the Board for Directors are kept abreast of regulatory approval, the roles and functions of changes, other developments and (c) Undertook an assessment to review the Board and Board Committees broad business trends; the term of office and evaluate of the Group, aiming to simplify and the Audit and Risk Management streamline the overall governance, Committee’s overall performance as well as to improve the efficiency and each of its members in of the Group; discharging its duties and responsibilities in accordance with its TOR;

115 Governance NOMINATION COMMITTEE REPORT

(e) Recommended the re-election of (h) Reviewed, deliberated and SELECTION AND ASSESSMENT Directors at the Ninth AGM to the recommended to the Board for OF DIRECTORS Board for consideration after taking approval the re-designation The Group has adopted the Policy on the into account the composition of the of Mehmet Ali Aydinlar as Nomination and Assessment Process of Board and the required mix of skills, Non-Executive Director of the Board Members (“Policy”) that sets out as well as the experience and Company following his cessation the process and requirements to be contributions of the individual as the Chief Executive Officer of undertaken by the NC and Board in Directors based on the assessment Acibadem Saglik Yatirimlari discharging their responsibilities in terms conducted for the year 2018; Holding A.S.; and of the nomination, assessment and (f) Reviewed and recommended to the (i) Reviewed, deliberated and re-election of Board members in Board for approval, the appointment recommended to the Board for compliance with the MMLR and MCCG. of Group General Counsel and approval, the appointment of The Policy is administered by the NC. Company Secretary; Takeshi Saito on the Board. (g) Reviewed the NC Report for inclusion The process for the appointment of in the Annual Report 2018; a new director is summarised in the diagram below:

STEP 1 Candidate identified The candidate can be identified on the recommendation of the existing Directors, Senior Management staff, shareholders or third party referrals.

STEP 2 Assessment and evaluation to be conducted by the NC The assessment should be conducted based on the following criteria:

(i) Integrity and Judgement (vi) Performance and Contribution (ii) Knowledge (vii) Experience and Accomplishments (iii) Diversity (viii) Board interaction (iv) Commitment (ix) Any other criteria deemed fit (v) Independent judgement

For an Independent Director position, additional assessment on independence would need to be carried out.

The NC would also need to consider the size and composition of the Board to be in compliance with MMLR and MCCG and to facilitate the making of informed and critical decisions.

STEP 3 Recommendation to be made by NC to the Board

STEP 4 Discussion and decision to be made by the Board on the proposed new appointment

STEP 5 If the proposed appointment is approved: If the proposed appointment is rejected: Invitation or offer to be made to the proposed/ The whole process to be re-commenced. potential candidate to join the Board.

116 IHH Healthcare Berhad | Annual Report 2018 Governance

During the year under review, the Board Pursuant to Article 113(1) of the Gender Diversity approved the following upon the Constitution of the Company, Dato’ The Company appreciates the benefits of recommendation of the NRC/NC: Mohammed Azlan bin Hashim, having gender diversity in the boardroom Chintamani Aniruddha Bhagat and Koji as a mix-gendered board would offer • The appointment of Jill Margaret Nagatomi shall retire at the forthcoming different viewpoints, ideas and market Watts as Independent Non-Executive Ninth AGM. The retiring Directors have insights, which enables better problem Director on 4 April 2018; and expressed their intention to seek solving to gain competitive advantage in • The re-designation of Dato’ re-election at the Ninth AGM. serving an increasingly diverse customer Mohammed Azlan bin Hashim as base compared to a boardroom that is Upon reviewing the results/findings of Independent Non-Executive Director dominated by one gender. on 27 November 2018. the performance evaluation undertaken during the year under review for the The Board also takes cognisance of RE-ELECTION OF DIRECTORS Board as a whole, Board Committees, the MCCG to have at least 30% women individual Directors and Independent The NC ensures that the Directors retire participation on public listed companies’ Directors, the Board is of the view that and are re-elected in accordance with boards. The Company does not set any the following Directors, who are subject the relevant laws and regulations and specific target for women Directors on to re-election at the Ninth AGM, have the the Constitution of the Company. the Board but will work towards having character, experience, integrity, more women Directors on the Board. Pursuant to Article 113(1) of the Constitution competence and time to effectively of the Company, at least one-third of the discharge their role as Directors. They Presently, there are three women Directors (excluding Directors seeking have also continuously brought objective Directors on the Board, comprising re-election pursuant to Article 120 of judgement in Board deliberations and Rossana Annizah binti Ahmad Rashid, the Constitution of the Company) are decisions. In this respect, the Board an Independent Non-Executive Director, required to retire by rotation at each recommended the shareholders to vote who is also the Chairman of the AC and AGM, provided always that all Directors, in favour of their re-election at the Ninth Risk Management Committee (“RMC”) including the Managing Director and AGM pursuant to Article 113(1) of the and a member of the NC and RC; Executive Directors, shall retire from Constitution of the Company: Jill Margaret Watts, an Independent office at least once every three years. A Non-Executive Director, who is also a (i) Dato’ Mohammed Azlan bin Hashim; retiring Director is eligible for re-election. member of the AC and RMC; and Quek (ii) Chintamani Aniruddha Bhagat; and Pei Lynn, Alternate Director to Chintamani Pursuant to Article 120 of the Constitution (iii) Koji Nagatomi. Aniruddha Bhagat. of the Company, any Director so appointed to fill a casual vacancy or as Takeshi Saito, who was appointed to the The Company shall provide a suitable an addition to the existing Directors, shall Board on 28 March 2019, will be subject working environment that is free from hold office only until the next following to re-election at the forthcoming Ninth harassment and discrimination in order to AGM, and shall then be eligible for AGM pursuant to Article 120 of the attract and retain women participation on re-election but shall not be taken into Constitution of the Company. the Board. account in determining the Directors who are to retire by rotation at that meeting. Any new Directors appointed prior to the convening of the Ninth AGM of The Directors recommended to be the Company will also be subject to re-elected at the AGM are subject to prior re-election at the forthcoming Ninth AGM assessment by the NC and are required pursuant to Article 120 of the Constitution to give their consent on their re-election of the Company. prior to NC and Board meetings. In assessing the candidates, the NC takes BOARDROOM DIVERSITY into consideration their character, The Company recognises and embraces experience, integrity, competence and the benefits of having a diverse Board time to effectively discharge their role and sees increasing diversity at the as Directors, as well as their contribution Board level as an essential element in and performance based on the maintaining competitive advantage. performance evaluation undertaken Thus, the Board will take the necessary during the year under review. The measures to ensure that in every possible recommendations are thereafter event, boardroom diversity will be submitted to the Board for deliberation taken into consideration in the board prior to recommending to the appointment, as well as annual assessment. shareholders for approval.

117 Governance NOMINATION COMMITTEE REPORT

Age Diversity The Company does not set any specific The Board acknowledges the benefits target for ethnic diversity in the of having diversity in the boardroom in boardroom but will work towards having terms of age demographics, which would appropriate ethnic diversity in the Board. create professional environments that are The Board is composed of Directors rich with experience and maturity, as well from different ethnic groups and foreign as youthful exuberance. The Board with countries where the Group has significant a wide range of age has the advantage of presence. The Company believes that the creating a dynamic, multi-generational Board members from different cultures workforce with a diverse range of skill contribute to more holistic and quality sets that are beneficial to the Company. discussions and more effective and The Company does not set any specific feasible ideas compared to a Board target for boardroom age diversity but with predominantly the same culture. will work towards having appropriate age Having Board members from different diversity in the Board. ethnic backgrounds widens the Board’s perspectives, especially when making The Company does not fix an age limit for a decision that touches on issues that its Directors given that such Directors are are peculiar to a particular ethnic group normally reputed and experienced in the or country. corporate world and could continue to contribute to the Board in steering The Board is of the view that, while the Company. promoting overall boardroom diversity is essential, the normal selection The Board is composed of Directors from criteria based on an effective blend diversified age groups ranging from the of competencies, skills, extensive age of 40 to 70, which enables the experience and knowledge to strengthen Board to drive the Group in delivering the Board should remain a priority. operational excellence. The Board Nonetheless, the Company will work would be able to tap on information towards achieving the appropriate from Directors of different age groups boardroom diversity mix covering in order to have better understanding gender, age and ethnicity to enhance of the needs and the sensitivities of the its effectiveness and governance stakeholders in their age group. performance.

Ethnic Diversity The NC is responsible for ensuring that the boardroom diversity objectives are The Board recognises that as today’s adopted in board recruitment, board world becomes increasingly global in its performance evaluation and succession outlook and as the marketplace becomes planning processes. increasingly global in nature, ethnic diversity in the boardroom would be The Boardroom Diversity Policy encouraged as it provides advantages is accessible for reference on that can help a company prosper, the Company’s website at including but not limited to, sharing of www.ihhhealthcare.com. knowledge in different markets where the Group is operating to enhance the Group’s global presence, as well as sharing of viewpoints by Directors from different ethnic backgrounds as when a variety of viewpoints are thrown into the problem-solving mix, new and innovative solutions can be reached.

118 IHH Healthcare Berhad | Annual Report 2018 REMUNERATION COMMITTEE Governance REPORT

On 1 July 2018, the Nomination and Remuneration Committee (“NRC”) was split into a Nomination Committee (“NC”) and Remuneration Committee ("RC"), respectively.

ROLES OF THE RC In carrying out its duties and COMPOSITION AND MEETINGS The RC is primarily to assist the Board responsibilities, the RC has the The RC is comprised exclusively of in fulfilling its fiduciary responsibilities following authorities: Non-Executive Directors, a majority of relating to the implementation of policies • Perform the activities required to whom are independent and represent and procedures on remuneration, discharge its responsibilities and an appropriate balance and diversity of including reviewing the Group’s make recommendations to the Board; skills, experience, gender and knowledge. executive remuneration policy, remuneration framework and • Select, engage and seek approval During the year under review, NRC performance measures criteria, including from the Board (within the Group’s membership was reduced to four the various incentive or retention Limits of Authority) for fees for following the retirement of Kuok Khoon schemes implemented by the Group. professional advisers that the RC may Ean as Independent Non-Executive require to carry out its duties; Director of the Company after the close The RC is governed by a clearly defined • Have full and unrestricted access to of the Eighth Annual General Meeting and documented Terms of Reference information, records, properties and (“AGM”) in May 2018. (“TOR”). The RC’s TOR is reviewed and employees of the Group; Based on the analysis/findings of the updated from time to time, as the need • Seek input from the concerned arises, to ensure that it remains relevant performance evaluation of the RC, individuals on remuneration policies, the Board is satisfied that the RC and up-to-date to be in line with the but no individual should be directly Group’s policies and various changes has consistently performed well and involved in deciding their own discharged its duties and responsibilities in regulations. The TOR of the RC was remuneration; and revised and approved by the Board for satisfactorily in accordance with its adoption with effect from 1 July 2018 • Have access to the advice and TOR under the chairmanship of the in light of the splitting of the NRC. services of the Company Secretary. RC Chairman. The TOR of the RC is accessible for The NRC/RC met six times during the reference on the Company’s website at year under review. The composition of www.ihhhealthcare.com. the RC and the attendance record of its members for the year under review are as follows:

Director Designation Total Meetings Attended Shirish Moreshwar Apte Independent Non-Executive Director 6/6 (Chairman) Chang See Hiang Senior Independent Non-Executive Director 6/6 (Member) Rossana Annizah binti Ahmad Rashid Independent Non-Executive Director 6/6 (Member) Chintamani Aniruddha Bhagat Non-Independent Non-Executive Director 4/4 (Member) (Appointed on 1 March 2018) Dato’ Mohammed Azlan bin Hashim Chairman, Independent Non-Executive Director 2/2 (Member) (Resigned on 1 March 2018) Kuok Khoon Ean Independent Non-Executive Director 3/4 (Member) (Retired on 28 May 2018)

119 Governance REMUNERATION COMMITTEE REPORT

The NRC/RC meetings were attended by (d) Discussed and recommended to the (c) Discussed and recommended to the Managing Director & Chief Executive Board for approval, the 2018 Long the Board for approval, the bonus Officer (“MD & CEO”) and Group Chief Term Incentive Plan (“LTIP”) and and salary increment for Executive Human Resource Officer together with Enterprise Option Scheme grants for Directors, Management and other consultants engaged on particular Executive Directors, Management employees of the Company and subject matters, upon invitation, to brief and employees upon assessing the key subsidiaries upon assessing the RC on pertinent issues. performance of the Company, the the performance of the Company, respective operating companies and subsidiaries and employees for the Minutes of the RC meetings would be employees; performance year 2018; circulated to all members for comments (e) Noted the proposed revision of (d) Discussed and recommended to the and extracts of the decisions made by the the Non-Executive Chairman and Board for approval, the 2019 LTIP RC would be escalated to relevant Directors fees as recommended by grant for the eligible Executive process owners for action. The Chairman Management post the streamlining Directors, Management and of the RC would provide a report exercise undertaken by the Group employees upon assessing the highlighting significant points of the (“Streamlining Exercise”) in view of performance of the Company, the decisions and recommendations made by the increased roles and responsibilities respective operating companies the RC to the Board and significant of the Non-Executive Chairman and and employees; matters reserved for the Board’s approval Directors; would be tabled at the Board meetings. (e) Discussed and recommended to the The RC may call for ad-hoc meetings as (f) Reviewed and recommended to Board for approval, the new incentive and when necessary to follow through on the Board for approval, the NRC scheme for the eligible employees of the necessary actions post the Board’s Report for inclusion in the Annual the Group to replace the LTIP which decision or to discuss matters which Report 2017; is expiring in 2021; require urgent decision. Urgent matters (g) Reviewed and recommended to the (f) Reviewed and recommended to the which require the RC’s decision may also Board for approval, the TOR of the Board for approval, the RC Report for be sought via circular resolutions RC in light of the splitting of the NRC inclusion in the Annual Report 2018; together with the proposals containing into an NC and RC respectively; and relevant information for their (h) Discussed and recommended to the (g) Reviewed the Non-Executive consideration. Board for approval, the new incentive Directors fees from 1 July 2019 until scheme for the eligible employees of 30 June 2020. SUMMARY OF ACTIVITIES the Group replacing the LTIP scheme During the financial year, the RC carried which will be expiring in 2021; and out the following key activities: (i) Reviewed and discussed the Executive Compensation Review (a) Assessed the performance and Report and findings prepared by the achievement of the key performance external consultant engaged. indicators of the Group for 2017 against the pre-determined targets Subsequent to the financial year ended in the balanced scorecard which 31 December 2018, the RC carried out the had been approved by the Board; following activities: (b) Deliberated and recommended to the Board for approval, the balanced (a) Assessed the performance and scorecard of the Group for the year achievement of the key performance 2018 and balanced scorecard indicators of the Group for 2018 framework for the year 2019; against the pre-determined targets in the balanced scorecard which (c) Discussed and recommended to had been approved by the Board; the Board for approval, the bonus and salary increment for Executive (b) Deliberated and recommended Directors, Management and to the Board for approval, the employees of the Company and balanced scorecard of the Group key subsidiaries (where applicable) for the year 2019; upon assessing the performance of the Company, subsidiaries and employees for the performance year 2017;

120 IHH Healthcare Berhad | Annual Report 2018 AUDIT COMMITTEE REPORT Governance

The Audit and Risk Management Committee (“ARMC”) was established on 18 April 2012 in line with the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad. On 1 July 2018, the ARMC was split into an Audit Committee (“AC”) and Risk Management Committee ("RMC"), respectively.

ROLES OF THE AC In carrying out its duties and • Authorise the AC Chairman for the time being to carry out the AC’s The AC is primarily to assist the Board responsibilities, the AC has the responsibilities as required under in fulfilling its statutory and fiduciary following authority: the Whistleblowing Policy for the responsibilities relating to monitoring and • Approve any appointment or Group; and management of financial risk processes termination of senior staff members • Have access to the advice and along with its accounting and financial of the internal audit function; reporting practices, reviewing the services of the Company Secretary. business processes, ensuring the efficacy • Convene meetings with the external of the system of internal controls, and in auditors, the internal auditors or COMPOSITION AND MEETINGS both, excluding the attendance of maintaining oversight of both external The AC is comprised exclusively of other directors and employees of and internal audit functions for the Group Independent Non-Executive Directors, the Group whenever deemed on behalf of the Board. and no Alternate Director is appointed as necessary, and such meetings with a member of the AC. The AC members the external auditors shall be held The AC is a Board delegated committee come from diverse backgrounds with at least twice a year; empowered by the Board to carry out its extensive experience in banking, finance, duties and responsibilities as set out in • Obtain external professional advice legal practice, healthcare and corporate the Terms of Reference (“TOR”). The TOR or other advice and invite persons governance issues. The composition of is assessed, reviewed and updated from with relevant experience to attend the AC is in compliance with Paragraph time to time, as the need arises, to ensure its meetings, if necessary; 15.09(1) of the MMLR. that it remains relevant and up-to-date • Investigate any matter within its TOR, to be in line with the requirements have the resources which it needs to In April 2018, Jill Margaret Watts, an in the Malaysian Code on Corporate do so and have full and unrestricted Independent Non-Executive Director, Governance, and the MMLR or any other access to information pertaining to was appointed as an additional member applicable regulatory requirements. the Group and the Management of the ARMC. The Board believes that the The TOR would also be reviewed and whereby all employees of the Group existing AC composition provides the updated in the event of changes to the are required to comply with the appropriate balance in terms of skills, direction or strategies of the Group that requests made by the AC; experience, gender and knowledge to may affect the role of the AC. The TOR ensure the effective functioning of the • Have direct communication channels was last revised in light of the splitting AC. Based on the analysis/findings of to engage with the external auditors of the ARMC and approved for adoption the performance evaluation of the AC and internal auditors and also to by the Board with effect from 1 July 2018. and its individual AC members by the engage with the Senior Management, The TOR of the AC is accessible for Nomination Committee, the Board is such as the Managing Director and reference on the Company’s website at satisfied that the AC has consistently Chief Executive Officer (“MD & CEO”), www.ihhhealthcare.com. performed well during the financial the Chief Operating Officer and the year and discharged its duties and Chief Financial Officer of the Group responsibilities satisfactorily in upholding and its operating subsidiaries, on the integrity of financial reporting and a continuous basis in order to be managing financial risks in accordance kept informed of matters affecting with its TOR. The AC members have the Group; sound judgement, objectivity, an • Appoint an independent party to independent attitude, professionalism, conduct or to assist in conducting integrity, knowledge of the industry and any investigation, upon the terms are financially literate. of appointment to be approved by the AC;

121 Governance AUDIT COMMITTEE REPORT

During the financial year under review, assessment by the AC. The remaining 2017. The composition of the ARMC/ the ARMC/AC held seven meetings in one meeting was held to review the AC and the attendance record of its total, out of which four were quarterly Audited Consolidated Financial members for the year under review meetings while two meetings were held Statements of the Company and Group are as follows: to consider projects which require an for the financial year ended 31 December

Director Designation Total Meetings Attended Rossana Annizah binti Ahmad Rashid Independent Non-Executive Director 7/7 (Chairman) Chang See Hiang Senior Independent Non-Executive Director 7/7 (Member) Shirish Moreshwar Apte Independent Non-Executive Director 7/7 (Member) Jill Margaret Watts Independent Non-Executive Director 4/4 (Member) (Appointed on 4 April 2018)

The ARMC/AC meetings were attended SUMMARY OF ACTIVITIES (d) Reviewed and made recommendations by the MD & CEO, Group Chief Operating During the financial year, the ARMC/AC to the Board for approval the Annual Officer, Group Chief Financial Officer carried out the following key activities: Audited Financial Statements of the (“GCFO”), Group Head, Internal Audit Company and the Group for the and Head, Risk Management, together Financial Reporting financial year ended 31 December with other members of the Senior 2017 to ensure that it presented (a) Reviewed the unaudited quarterly Management of the Group and the a true and fair view of the Group’s financial results of the Group, including external auditors, upon invitation, financial position and performance the draft announcements pertaining to brief the AC on pertinent issues. for the year and is in compliance with thereto, significant judgements made Senior Management of the Group are regulatory requirements; by Management, significant matters also invited to brief and provide highlighted and how these matters (e) Reviewed with the external auditors clarification to the AC on their areas of are addressed for recommendation their audit plan and strategy for the responsibility for specific agenda items to be made to the Board for approval. financial year ended 31 December to support detailed discussions during These reviews serve to ensure 2018, outlining, among others, the the AC meetings. that IHH’s financial reporting and audit scope, methodology and timing of audit, audit materiality, audit focus The external auditors also attended and disclosures present a true and areas, other audit findings and fraud briefed the ARMC/AC on matters relating fair view of the Group’s financial risk assessment; to external audit at five of the ARMC/AC position and performance and are meetings held during the financial year in compliance with the MMLR and (f) Reviewed the revaluation of and provided a high level review of the applicable accounting standards investment properties of the financial position of the Group at the in Malaysia; Group which was undertaken by aforesaid meetings. (b) Reviewed the report of the external independent valuers to ensure that the auditors on the review focus areas current market value of the investment Minutes of the AC meetings would be and key findings arising from their properties was in compliance with circulated to all members for comments review of the unaudited quarterly MFRS 140, Investment Property, prior and extracts of the decisions made by the financial results of the Group; to the same being tabled to the Board AC would be escalated to the relevant for approval; (c) Reviewed the focus areas as well process owners for action. At the Board as issues reported arising from the meetings, the Chairman of the AC would annual statutory audit by the external provide a report, highlighting pertinent auditors, Management’s responses to issues, significant points of the decisions the audit findings and any changes in and recommendations made by the AC or implementation of major accounting to the Board and matters reserved for the policy changes for the financial year Board’s approval, if any. ended 31 December 2017;

122 IHH Healthcare Berhad | Annual Report 2018 Governance

External Auditors Internal Audit Related Party Transactions (g) Evaluated the performance of the (k) Reviewed and approved the 2018 and Recurrent Related Party external auditors for the financial internal audit plan to ensure that Transactions year ended 31 December 2017, there is adequate scope and (q) Monitored the thresholds of the covering areas such as the calibre of comprehensive coverage over the related party transactions and external audit firm, independence and activities of IHH Group and that all recurrent related party transactions to objectivity, quality of the processes/ high-risk areas are audited annually, ensure compliance with the MMLR; performance, audit team, audit scope as well as the availability of adequate (r) Reviewed the related party and planning, audit fees, audit resources within the internal audit transactions undertaken by the communications and resources which team to carry out the audit work; Group as required under the Limits was supported by the assessment (l) Reviewed the internal audit reports of Authority (“LOA”) of IHH Group conducted by relevant Management issued by the internal audit function to ensure that they are in the best members on the experience and of the major operating companies interest of the Group, fair and opinions of the firm, independence (“Major OpCos”) during the year reasonable, on normal commercial and objectivity and quality of the and presented at quarterly ARMC/AC terms and not detrimental to the processes/performance of the meetings; interest of the minority shareholders external auditors. The AC, having (m) Monitored the implementation of IHH, prior to the same being tabled been satisfied with the independence, of the management action plan on to the Board for approval, where suitability and performance of KPMG outstanding issues on a quarterly applicable; PLT, had recommended to the Board basis to ensure that all key risks for approval the re-appointment and control weaknesses are being Verification of the Allocation of of KPMG PLT as external auditors properly addressed until the issues Long Term Incentive Plan (“LTIP”) for the financial year ended are fully resolved and rectified; units and Enterprise Option Scheme 31 December 2018; (n) Met with the Group Head, Internal (“EOS”) options (h) Reviewed and recommended to the Audit twice, without the presence (s) Verified the allocation and movement Board for approval the proposed of the Executive Directors and of LTIP units and EOS options fees for the annual audit, one-time Management, with the exception of respectively for the year 2017 to audit related service and non-audit the Company Secretaries, during the ensure that it had been carried services rendered by the external year under review to obtain feedback out consistently according to the auditors for the financial year ended on the audit activities, audit findings approved criteria and matrix 31 December 2017; and any other related matters; stipulated in the respective Bye Laws (i) Reviewed the audit plan of Fortis (o) Reviewed the Key Performance of LTIP and EOS; Healthcare Limited, a subsidiary of Indicators, competency and resources the Group, which was acquired on of the internal audit function to ensure Other Activities 13 November 2018; that, collectively, the internal audit (t) Reviewed and recommended to the (j) Met with the external auditors twice function is suitable and has the Board for approval the ARMC Report without the presence of the Executive required expertise, resources and and Statement on Risk Management Directors and Management during professionalism to discharge its and Internal Control for inclusion in the year under review, with the duties, etc; the Annual Report 2017; exception of the Company (p) Reviewed the report of the internal (u) Monitored the progress of the Secretaries, to discuss any issues or auditors in respect of their audit of implementation of the new IT reservations arising from the audits the related party transactions and system and platform throughout and any other matters the external recurrent related party transactions the Group and assessed the post auditors may wish to discuss, (except transactions exempted by implementation review report including but not limited to the system law and/or the MMLR) entered into prepared by an independent party of internal controls and assistance by IHH and its subsidiaries to ensure engaged to ensure smooth and given by the Group’s employees to compliance with the MMLR; successful implementation of the facilitate their audit work; new system and platform;

123 Governance AUDIT COMMITTEE REPORT

(v) Reviewed the Group debt and Subsequent to the financial year ended (h) Confirmed and verified the allocation cash position (including the treasury 31 December 2018, the AC carried out and movement of LTIP units and and foreign exchange management) the following duties: EOS options respectively for the of IHH and its subsidiaries on a year 2018 to ensure that it had been quarterly basis to assess the various (a) Reviewed the internal audit work plan carried out according to the criteria financial ratios, debt headroom, for the financial year ending 31 and matrix stipulated in the Bye Laws balance sheet risk, projected capital December 2019; of LTIP and EOS; expenditure and funding status and (b) Reviewed the material matters as (i) Reviewed the report of the internal additional financing initiatives, as highlighted by the AC of the relevant auditors in respect of their audit of well as foreign currency exposures operating subsidiaries of the Group; the related party transactions and of the Group in connection with its (c) Reviewed the results as well as recurrent related party transactions subsidiaries which are operating reported issues arising from the (except transactions exempted by abroad, and made relevant annual statutory audit, Management’s law and/or the MMLR) entered into recommendations to the Board responses to the audit findings and by IHH and its subsidiaries to ensure to ensure that the business has any changes in or implementation of compliance with the MMLR; sufficient liquidity to meet its major accounting policy changes for (j) Reviewed the revaluation of obligations, whilst managing the financial year ended 31 December investment properties of the payments, receipts and financial 2018; Group which was undertaken by risks effectively; (d) Reviewed the Annual Audited independent valuers to ensure that (w) Reviewed the summary report and Financial Statements of the Company the current market value of the proposed financial assistance and the Group for the financial year investment properties was in provided to the subsidiaries and ended 31 December 2018 and made compliance with MFRS 140, associates of the Group to ensure recommendations to the Board for Investment Property, prior to the that it is fair and reasonable to the approval; same being tabled to the Board for Company and is not to the detriment (e) Reviewed the focus areas highlighted approval; of the Company and its shareholders, by the external auditors in relation to (k) Reviewed the AC Report as well as prior to the same being tabled to the the statutory audit for the financial Statement on Risk Management and Board for approval, where applicable; year ended 31 December 2018; Internal Control for inclusion in the (x) Evaluated the performance of the (f) Evaluated the GCFO and internal Annual Report 2018; GCFO of the Company to ensure that auditors in connection with their (l) Met with the external auditors without the GCFO has the character, performance for the financial year the presence of the Executive experience, integrity, competence ended 31 December 2018; Directors and Management, with and time to effectively discharge his the exception of the Company role as the GCFO of the Company; (g) Considered the re-appointment of external auditors for the ensuing Secretary, to discuss any issues (y) Reviewed and recommended to the year upon reviewing the suitability or reservations arising from the audit Board for approval the TOR of the AC and independence of the external for financial year ended 31 December in light of the splitting of the ARMC auditors. The AC also reviewed and 2018, including but not limited to the into an AC and RMC respectively; and recommended to the Board for system of internal controls and (z) Reviewed and recommended to the approval the proposed fees for the assistance given by the Group’s Board for approval, the revisions to annual audit, one-time audit related employees to facilitate their audit the LOA of IHH Group following the service and non-audit services work; and restructuring and streamlining of the rendered by the external auditors (m) Met with the Group Head, Internal overall governance structure of IHH for the financial year ended Audit without the presence and its relevant subsidiaries. 31 December 2018; of the Executive Directors and Management, with the exception of the Company Secretary, to obtain feedback on any concerns noted in the course of auditing and feedback on the overall internal audit function of the Group.

124 IHH Healthcare Berhad | Annual Report 2018 Governance

GROUP INTERNAL AUDIT The internal audit reports are issued to FUNCTION Management for their comments and for The internal audit function is under the them to agree on action plans with purview of the Group Internal Audit deadlines to complete the necessary (“Group IA”) department. Group IA is preventive and corrective actions. The independent and reports directly to the reports and summary of key findings are AC. The internal audit reporting structure tabled to the AC for deliberation to within the Group has been organised in ensure that Management undertakes to such a way where the internal audit carry out the agreed remedial actions. function of the Major OpCos reports to Please refer to the Statement on Risk the AC with a dotted reporting line to Management and Internal Control as laid Group IA. Group IA has direct control and out on pages 128 to 134 of this Annual supervision of internal audit activities in Report for the summary of the work of the those subsidiaries that do not have an internal audit function undertaken during internal audit function. the year ended 31 December 2018.

Group IA provides independent, objective The total costs incurred by Group IA in assurance on areas of operations 2018, inclusive of all the Major OpCos, reviewed and makes recommendations was RM8,029,680. based on the best practices that will improve and add value to the Group. Group IA identifies, coordinates, monitors and oversees the internal audits that are to be carried out throughout the Group and also provides standards, policies, guidelines and advice to the subsidiaries’ internal audit functions to standardise the internal audit activities within the Group.

Group IA adopts a systematic and disciplined approach to evaluate the adequacy and effectiveness of the financial, operational and compliance processes. Structured risk-based and strategic-based approaches are adopted in identifying the internal audit activities that are aligned with the Group’s strategic plans to ensure those risks faced by the Group are adequately reviewed. In addition, international standards and best practices are adopted to enhance the relevancy and effectiveness of the internal audit activities.

125 Governance RISK MANAGEMENT COMMITTEE REPORT

On 1 July 2018, the Audit and Risk Management Committee (“ARMC”) was split into an Audit Committee ("AC") and Risk Management Committee ("RMC"), respectively.

ROLES OF THE RMC In carrying out its duties and COMPOSITION AND MEETINGS The RMC is primarily to assist the Board responsibilities, the RMC has the The RMC is comprised exclusively of in reviewing the management of key risks following authority: Independent Non-Executive Directors. impacting the Group’s operations, • Obtain external professional advice or The RMC members come from diverse ensuring the implementation of effective other advice and invite persons with backgrounds with extensive experience risk management processes for the relevant experience to attend its in banking, finance, legal practice, Group and clinical governance to ensure meetings, if necessary; healthcare and corporate governance the delivery of high quality and safe issues. patient care across the Group. Its role • Investigate any matter within its TOR, includes reviewing the clinical quality have the resources which it needs to In April 2018, Jill Margaret Watts, an indicators across the Group’s operations do so and have full and unrestricted Independent Non-Executive Director, in different jurisdictions and ways to access to information pertaining to was appointed as an additional member improve and enhance clinical quality. the Group and the Management, of the ARMC. The Board believes that whereby all employees of the Group the existing RMC composition provides The RMC is a Board delegated committee are required to comply with the the appropriate balance in terms of skills, empowered by the Board to carry out its requests made by the RMC; experience, gender and knowledge to duties and responsibilities as set out in • Have direct communication ensure the effective functioning of the the Terms of Reference (“TOR”). The TOR channels to engage with the Senior RMC. Based on the analysis/findings is assessed, reviewed and updated from Management, such as the Managing of the performance evaluation of the time to time, as the need arises, to ensure Director and Chief Executive Officer RMC, the Board is satisfied that the RMC that it remains relevant and up-to-date to (“MD & CEO”), the Chief Operating has consistently performed well during be in line with the requirements in the Officer and the Chief Financial Officer the financial year and discharged its Malaysian Code on Corporate of the Group and its operating duties and responsibilities satisfactorily Governance, and the Main Market Listing subsidiaries, on a continuous basis in accordance with its TOR. Requirements of Bursa Malaysia in order to be kept informed of Securities Berhad or any other applicable matters affecting the Group; During the financial year under review, regulatory requirements. The TOR would the ARMC/RMC held six meetings in total. • Appoint an independent party to The composition of the ARMC/RMC and also be reviewed and updated in the conduct or to assist in conducting event of changes to the direction or the attendance record of its members any investigation, upon the terms for the year under review are as follows: strategies of the Group that may affect of appointment to be approved by the role of the RMC. The TOR was last the RMC; and revised in light of the splitting of the ARMC and approved for adoption by • Have access to the advice and the Board with effect from 1 July 2018. services of the Company Secretary. The TOR of the RMC is accessible for reference on the Company’s website at www.ihhhealthcare.com.

Director Designation Total Meetings Attended Rossana Annizah binti Ahmad Rashid Independent Non-Executive Director 6/6 (Chairman) Chang See Hiang Senior Independent Non-Executive Director 6/6 (Member) Shirish Moreshwar Apte Independent Non-Executive Director 6/6 (Member) Jill Margaret Watts Independent Non-Executive Director 3/3 (Member) (Appointed on 4 April 2018)

126 IHH Healthcare Berhad | Annual Report 2018 Governance

The RMC meetings were attended by Medical/Quality and Clinical Other Activities the MD & CEO, Group Chief Operating Quality Updates (g) Reviewed and recommended to the Officer, Group Chief Financial Officer (c) Reviewed the reports on Medical/ Board for approval the TOR of the (“GCFO”), Group Head, Internal Audit, Quality and Clinical Quality Updates, RMC in light of the splitting of the Head, Risk Management and Head, which encompassed the following ARMC into an AC and RMC Medical Affairs, together with other activities: respectively. members of the Senior Management of (i) report on clinical quality indicators the Group, upon invitation, to brief the Subsequent to the financial year ended of the Group’s operating divisions RMC on pertinent issues. 31 December 2018, the RMC carried out in Malaysia and Singapore with the following duties: Minutes of the RMC meetings would be the key objectives of monitoring circulated to all members for comments and assessing the clinical (a) Reviewed the Group’s consolidated and extracts of the decisions made by the performance of hospitals so as ERM reports, including the Major RMC would be escalated to the relevant to facilitate continuous quality OpCos’ ERM reports, which covered process owners for action. At the Board improvement and benchmarking; the Group’s ERM reporting status, meetings, the Chairman of the RMC (ii) report on the action plans to risk profile, key highlights and risk would provide a report highlighting highlight initiatives that drive priorities; pertinent issues, significant points of the quality improvement activities; (b) Reviewed the reports on Medical/ decisions and recommendations made (iii) report on the trend of serious Clinical Quality updates, which by the RMC to the Board and matters reportable events, adverse include reporting on clinical quality reserved for the Board’s approval, if any. events and near misses to indicators of the Group’s operating highlight problem areas in clinical divisions in Malaysia, Singapore, India, SUMMARY OF ACTIVITIES performance and opportunities Hong Kong and other South East During the financial year, the ARMC/RMC for improvement; Asian countries; carried out the following key activities: (c) Reviewed the RMC Report as well as International Clinical Governance Statement on Risk Management and Enterprise Risk Management Advisory Council Internal Control for inclusion in the (a) Reviewed the Group’s consolidated (d) Reviewed the International Clinical Annual Report 2018; and Enterprise Risk Management (“ERM”) Governance Advisory Council’s (d) Noted the Sustainability Reporting reports, including the major operating (“Council”) interim reports on matters methodology and workplan for the companies’ (“Major OpCos”) ERM related to clinical governance Group for 2019. reports, which covered the Group’s practices across the Group. This ERM reporting status, risk profile, key accords the RMC with a better highlights and risk priorities, to ensure understanding of the performance that the Group’s business activities of the member hospitals with regard and risk management methodologies to patient safety and clinical quality, are aligned and enhanced on an as well as the progress reports on ongoing basis. This is to proactively the activities undertaken within the manage the key risk areas that arise four workstreams under the TOR of with the developments in the external the Council; operating environment; (e) Noted the assessment conducted (b) Reviewed the reports pertaining to by the Council to determine whether cyber risk prepared by the Group the Council has been effective in Risk Management team in joint discharging its clinical governance collaboration with the information advisory role; technology (“IT”) team, which covered, among others, the cyber Sustainability Disclosures risk heat map, cyber security (f) Reviewed and recommended tender coverage and updates, to the Board for approval the implementation of cyber security Sustainability Disclosures covering threat countermeasure components the period from 1 January 2018 to and technical risk assessment 31 December 2018 in line with the resolution, aiming to identify and Global Reporting Initiative (“GRI”) mitigate any potential cyber threat Standards – Core Options and which may impact the Group’s GRI Sector Disclosures for inclusion IT system; in the Annual Report 2018; and

127 Governance STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

The Board of Directors of IHH Healthcare Berhad (“IHH” or the “Company”), together with that of its subsidiary companies (“the Group”), is committed to maintaining a sound system of risk management and internal control. In accordance with Paragraph 15.26(b) of the Listing Requirements of Bursa Malaysia Securities Berhad, the Board is pleased to provide the following Statement on Risk Management and Internal Control prepared in accordance with the “Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers”.

BOARD RESPONSIBILITY on the financial reporting process and Recommendations by The Board, in discharging its ensuring Management maintains a sound Internal Auditors system of internal controls to safeguard responsibilities, is fully committed to The Group has an Internal Audit function and enhance enterprise value. maintaining a sound system of risk to review the effectiveness of the management and internal control, The internal control system covers areas material internal controls of the as well as to review its adequacy, of finance, operations and compliance, major operating subsidiaries based integrity and effectiveness to safeguard and provides reasonable assurance on the approved annual audit plan. shareholders’ investment and the that the following objectives have Unannounced visits are conducted Group’s assets. The system of risk been achieved: randomly to ensure compliance at management and internal control by its all times. nature is designed to manage key risks (i) Reliability and integrity of financial that may hinder the achievement of the reports; Consequently, Management ensures Group’s business objectives within an that the recommendations made by (ii) Compliance with relevant regulations, the Internal Auditors to strengthen acceptable risk profile. In view of the policies, procedures and laws; limitations inherent in any system of and improve the internal controls risk management and internal control, (iii) Safeguarding of the Company’s assets; have been implemented. the systems put in place can only (iv) Effective and efficient utilisation of manage risks within tolerable and the Company’s resources; and Budgets and Performance knowledgeable levels, rather than (v) Ensuring the long-term sustainability Monitoring eliminate the risk of failure to achieve of the Company Annual Budgets are prepared by the business objectives completely. major operating subsidiaries and For the year ended 2018, the Board is approved by their respective Boards. CONTROL STRUCTURE of the view that the present system of These budgets are then consolidated The Board is assisted by the Audit internal control is adequate and has into the IHH Group Budget and approved Committee (“AC”) and Risk Management been adhered to, to the best of its ability. by the IHH Board. Committee (“RMC”), which consist The opinion is based on the following The major operating subsidiaries’ of four Independent Non-Executive key internal controls practised: performance is presented and members of the Board. The Board, Limits of Authority discussed at their respective Board through the AC and RMC, maintains risk meetings on a quarterly basis, and oversight within the Group to ensure The Limits of Authority established is also discussed together with the that the implementation of the approved by the Group serves to govern the consolidated IHH Group Performance policies and procedures on risks and operations of all companies within the at the quarterly IHH Board meetings. controls is as intended. The approved Group. It encompasses authorised policies and appropriate key internal signatories for Procurement and Payment, Financial Treasury, Human Procurement and controls have been put in place to Project Management mitigate the key risk areas which have Capital Management, Corporate been identified and assessed by the Transactions, Legal Documentation and There is a Centralised Procurement respective departments in charge for Donations. It defines the authority limit function in each major operating the year under review and up to the for each level of management in the subsidiary for major purchases such as date of approval of this statement for major operating subsidiaries and the hospital equipment, drugs, maintenance inclusion in the annual report. Group as a whole. Major capital expenditures and expansion projects. investment, acquisition and disposal This ensures adherence to the Group The Board, through the AC, provides are approved by the Board of the major Procurement Guidelines, and provides constructive, focus and independent view operating subsidiaries and the Group. economies of scale during negotiations.

128 IHH Healthcare Berhad | Annual Report 2018 Governance

Major expenditure is subject to Tender For the year ended 31 December 2018, (c) The plan would also address procedures and evaluated by the the ICGAC initiatives undertaken during robust investigation of hospital Tender Committee. the year were as follows: incidents, as well as system-wide improvement projects using There is also a Centralised Project 1. At the 6th Council Meeting, the ICGAC quality improvement methodology Management office in each major revised the ICGAC Terms of operating subsidiary to handle and Reference which was subsequently The IHH Board and Management have manage major renovation and expansion approved and endorsed by the IHH accepted the report. projects undertaken by the respective Healthcare Board of Directors. One major operating subsidiaries. key area was to advise on promoting Management will develop a Plan of evidence-based medical practice Action based on the recommendations in the report and subsequently engage Legal and Regulatory 2. Sharing of Adverse Event (“AE”) study with the ICGAC on the progress made The major operating subsidiaries adhere results conducted at Singapore in Clinical Governance. strictly to the applicable Acts and hospitals where it focused on Regulations, as required of an institution hospitalised patients and the cost of The Council comprises the following operating private hospitals, medical treating AEs leading to excess Length members: clinics, private higher education, and of Stay (“LOS”) and re-hospitalisation; healthcare services. Amongst them, are 3. Risk management strategy for 1. Dr Joseph Sheares, Cardiothoracic the established Acts and Regulations hospital acquired infections (“HAI”) surgeon, Mt Elizabeth Hospital, such as the Private Hospital and Medical conducted at Turkey hospitals in Singapore Clinic Act, Private Hospital and Medical relation to: 2. Tan Sri Datuk Dr K. Ampikaipakan, Clinic Regulations, Dangerous Drugs and Consultant respiratory physician Poison Act, Private Higher Educational (a) Analyse and identify critical at Pantai Hospital, Kuala Lumpur, Institutional Act, as well as the factors that affect the Malaysia Occupational Safety and Health Act. effectiveness of HAI protocols; Quality audits are also conducted by the (b) Solutions will be developed and 3. Dr E.H Akalin, Independent academic Quality Assurance function within the implemented at each facility consultant, Istanbul, Turkey hospital and by the Group Accreditation, during improvement phase; Ex-officio members: Standards and Medical Affairs (c) Continuous education to push Departments on an ongoing basis. for compliance; and 4. Dr Ross Wilson, Former Senior Vice (d) Create a risk management culture President, Chief Medical Officer and Fraud Prevention Chief Transformation Officer, New The Board strives to have zero 4. Assembly of Country CEOs from York City Health & Hospitals incidences of fraud with strong internal various geographies including 5. Tan Sri Dato’ Dr Abu Bakar, Emeritus accounting controls, proper segregation Singapore, Malaysia, India, China, President/Chairman of the IMU Group of duties in the work processes, and Hong Kong, and Brunei at the 6th 6. Dr K Ravindranath, Chairman, Global regular audits carried out by the Group Council meeting on 29 August 2018. Hospitals Group Internal Auditors team. The meeting allowed Country CEOs to share and discuss priorities and 7. Dr Tan See Leng, Group Managing The inherent system of internal controls key challenges in the following areas: Director/ Chief Executive Officer, IHH is designed to provide a reasonable, (a) Clinical Governance Structure; 8. Dr Lim Suet Wun, Group Chief though not absolute, assurance against Operating Officer, IHH the risk of fraud, material errors or losses. (b) Four Pillars of Clinical Governance; 9. Dr T Thirumoorthy, Group Chief (c) Clinical Quality Indicators; and Medical Officer, IHH CLINICAL GOVERNANCE (d) Key priorities for 2019 10. Ms Nellie Yeo, Vice President, Quality International Clinical Governance and Medical Affairs, PPL Advisory Council (“ICGAC”) 5. Report from ICGAC was shared at the IHH Board in October 2018, and its In its third year as an independent recommendations included: high-level advisory committee, the Council continues to serve as an advisory (a) The development of a 3-year plan in the areas of Clinical Governance which to strengthen clinical governance covers the management of Clinical across the whole system; Affairs, including Quality and Patient (b) The plan would address Safety, Clinical Risk Management, standardised reporting of Continuing Professional Development performance at all levels and and clinical training. strengthen reporting and analyses of hospital incidents;

129 Governance STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

CONTROL ENVIRONMENT Such systems provide reasonable, rather The Group recognises that Enterprise The operating structure includes a than absolute, assurance against material Risk Management (“ERM”) is a proactive defined delegation of responsibilities in incidents or loss. management system for anticipating terms of the management of operating emerging risks and putting in place subsidiaries. The limit of authority is RISK MANAGEMENT pre-emptive action plans so that the clearly defined and set out in the Group’s The Group recognises that risk effect of uncertainties on fulfilling policies. management is an important and integral business goals and objectives are part of good management and corporate minimised. The Group has in place a These policies and procedures are meant governance practice, and fundamental to Risk Management Framework which to be reviewed regularly and updated driving shareholder value through quality is consistent with the definition of an when necessary. healthcare. Although risks cannot be ‘appropriate framework’ in Standard completely eliminated, effective risk ISO 31000:2018 Risk Management — A Whistleblowing Policy is in place within identification and management can Guidelines. the Group’s major operating subsidiaries. reduce the uncertainties associated The framework encompasses practices This policy encourages employees to with executing the Group’s business relating to the identification, assessment report any wrongdoing by any person in strategies and maximising opportunities and measurement, response and action, the Group to the proper authorities so that may arise. that the appropriate business action can as well as monitoring and reporting of be taken immediately. Operating Companies and business the strategic and operational control units have a primary responsibility for risks pertinent to achieving our key The system of risk management and managing risk exposures. Group Risk is business objectives. internal control covers not only financial the central resource for managing the controls but also operational, risk and portfolio of risks assumed by the Group Evaluate-Response-Monitor compliance controls as well. These as a whole, and works closely with (“E-R-M”) Process systems are designed to manage, rather business units to strengthen their risk For the year ended 31 December 2018, than eliminate, the risk of failure arising management practices and capabilities. the major risk management activities from non-achievement of the Group’s Risk updates are consolidated and undertaken during the year were policies, goals and objectives. analysed for monitoring and reporting as follows: to the Group’s RMC on a quarterly basis.

Ris g k Id tin en or ti p ﬁc e a R t io n Establish the context • Understand business strategy

& objectives

Risk t

n n

e M Management • Review business environment

m o s m • Understand the risk acceptance n Framework s e i t e r criteria o s u r s s i n a A • Identify critical business g k e is M processes R & R isk Response & Action

130 IHH Healthcare Berhad | Annual Report 2018 Governance

1. Contributed to the development of 12. Conducted Group-wide risk GROUP INTERNAL AUDIT assessment and benchmarking IHH Board RMC Terms of Reference The Group has an independent internal of IT security controls; (TOR); audit function, which is an integral part 2. Reviewed the adequacy and 13. Reviewed a major operating of the Group’s assurance framework, effectiveness of the risk control company’s data breach response plan with the function of reporting directly to processes and risk reporting systems; and third party vendor incident the AC. The Group Internal Audit’s 3. Reviewed and updated the Enterprise response services following a major (“Group IA”) primary mission is to Risk Management Governance policy; healthcare data breach in Singapore; provide an independent and objective 4. Embedded material sustainability 14. Enhanced the privacy and data assessment of the adequacy and matters into the Enterprise Risk protection governance for the Group effectiveness of the risk management, Management (“ERM”) framework to through the inclusion of Bulgaria internal control and governance identify and manage sustainability risks; Data Protection Officer (“DPO”) into processes. The internal audit function the DPO network; within the Group is structured such that 5. Assessed emerging risk relating to the internal audit function of the major disruptive innovation and developed 15. Monitored and assessed impact of EU General Data Protection operating subsidiaries has a dotted risk action plans with internal reporting line to the Group IA and a stakeholders; Regulation (GDPR) particularly for Bulgaria and Netherlands and all reporting line to the AC. Audits are 6. Monitored cost of insurance claims other affected entities to ensure performed on all major units or areas and claims settlement through compliance; in the audit population to provide an quarterly claims meetings with independent and objective report on insurance service providers as part 16. Reviewed the impact of China’s operational and management activities of the group insurance programme new national standard on personal in the Group. The Group IA will also of a major operating company; information protection that came perform ad-hoc audits and investigations into effect on 1 May 2018; 7. Developed a risk improvement plan requested by the AC and/or by to significantly reduce the claims 17. Provided advisory to a Telemedicine Senior Management, and will follow-up cost of work injuries for a country Compliance Workgroup overseeing on the implementation of audit operations division in order to reduce Digital Health initiatives for a country recommendations by Management to premium loading; operations division; ensure that all key risks are addressed. 18. Studied the impact of regulatory 8. Reviewed claims reporting system of The Annual Internal Audit plans of the medical malpractice cases for certain updates to Singapore’s Healthcare Services Bill and supported the Group as developed are reviewed and geographies, with plans to extend to approved by the AC annually. other Country operating divisions; compliance efforts; 9. Placement of construction insurances 19. Organised risk forums for the Greater The Group IA highlights significant gaps for new hospital projects in Greater China operations divisions to create identified in governance, risk China and Singapore operations greater awareness of emerging risks management and control, makes divisions; arising from China’s fast-changing recommendations for improvements, and expanding healthcare market as 10. Advised the Special Security Steering and tables management action plans well as the importance of improved Committee of a major operating to the AC through audit reports and communication and timely company providing strategic oversight during its quarterly AC meetings. The documentation to reduce medical on physical security policy and Group IA also follows up on the malpractice incidences; programmes across operations, management action plans to address the encompassing security risk 20. Organised medico-legal talks on improvements on a quarterly basis, and assessments, annual drills and action new developments such as the results of the status are presented at the plans to enhance physical security modified Montgomery test for staff quarterly AC meetings. measures across all facilities; and accredited doctors of Singapore operations division; and The Group IA adopts a systematic and 11. Supported a major operating disciplined approach to evaluate the 21. Carried out ad-hoc assignments company’s Cybersecurity Governance adequacy and effectiveness of the requested by Senior Management. Workgroup led by Group Chief Group’s governance, internal control Information Officer to strengthen and risk management system, using the the Group’s Cyber & IT Security Committee of Sponsoring Organisations Framework, adopting a Zero Trust of the Treadway Commission (“COSO”) model, Defence-in-Depth protection Internal Control – Integrated Framework. and Cyber Resilience strategy to ensure uncompromised confidentiality, integrity and availability of our mission-critical information assets;

131 Governance STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

onitoing nomation and ommunication COSO Internal Control— Integrated Framework ontol ctiities The adequacy and effectiveness of the Group’s risk management, internal control and governance processes are assessed and is ssessment reported according to the

following five interrelated nomation and ommunication COSO components:

ontol nionment

For the year ended 31 December 2018, • Reviewed the level of compliance The review of the adequacy and the major internal audit activities with established policies and effectiveness of the internal control undertaken were as follows: procedures and statutory process has been undertaken by the requirements to ensure that major internal audit function and necessary • Developed a risk-based annual audit units comply with the requirements, actions have been/are being taken to plan; with any non-compliances highlighted remedy any significant failing or • Performed financial and operational to Management for remediation; weakness for the financial year under audits on revenue cycle management • Witnessed the tendering process review and up to the date of approval (covering billing, cash and credit for procurement of services or of this statement for inclusion in the collections, credit control and assets of the Group to ensure the annual report. accounts receivable), procurement activities in the tendering process In the course of performing its duties, the and inventory and the capital and are conducted in a fair, transparent Group IA has unrestricted access to all operating expenditure of hospitals, and consistent manner; clinics and ancillary departments functions, records, documents, personnel, • Carried out ad-hoc assignments within the Group; or any other resources or information, and investigations requested by the at all levels throughout the Group. • Conducted Information Technology AC and Senior Management; and (“IT”) audits, risk assessments, • Followed-up on the implementation security and control reviews across of the Management Action Plan to the entities of the Group; ensure that necessary actions have been taken/are being taken to remedy any significant gaps identified in governance, risk management and control.

132 IHH Healthcare Berhad | Annual Report 2018 Governance

OTHER RISK AND 3. The Medical Affairs department/ 7. Insurance policies relating to CONTROL PROCESSES Medical Execution Committee workforce compensation, property damage and equipment breakdown, The overall governance structure, and oversees the accreditation, as well cyber liability and network business formally defined policies and procedures as the qualifications and experience interruption, third party liability, play a major part in establishing the of our medical practitioners, and professional indemnity and medical control and risk environment of the will not hesitate to remove their malpractice liability, are procured Group. Although the Group is a privileges if they are found to be to meet the local regulatory networked organisation, a documented unethical or negligent. They also requirements and business and auditable trail of accountability has ensure patient safety and quality requirements of the operational been established within the operating of services delivered within the divisions and the wider Group; subsidiaries of the Group. hospitals, and compliance with government regulations; 8. Financial risk management systems Each major operating subsidiary of the 4. The respective quality committees are in place to address credit risk, Group is tasked with undertaking these or councils of the major operating liquidity risk, market risk, interest rate corporate governance and risk subsidiaries ensures the quality of risk and foreign currency risk; management practices as well as services and the safety of patients; 9. The internal auditors independently implementing the same: 5. On a quarterly/monthly basis, the audit and report findings on financial, operations divisions are to submit to operational and compliance controls 1. A governance and management the Group CEO updates pertaining to the AC or the Board. In addition, structure is established within each to clinical/medico-legal cases, IT, on an annual basis, the external hospital for functional accountability hospital development projects, auditors perform statutory audit with operational/functional heads business matters, HR matters, and report findings on financial reporting financial, operational financial performance and analyses, controls relevant to the statutory (clinical and non-clinical) risks, group target savings, as well as audit to the AC; and compliance with statutory and the outlook for the business and regulatory requirements and 10. Employees must abide by the strategic projects. These information reputational risks to the Hospital Chief Code of Conduct and avoid any will form the body of the Executive Executive Officer (“CEO”)/Director; dealings or conduct that could be Report by the Group CEO to the or could appear to be in conflict with 2. Hospital CEOs/Directors, Business Board of each major operating the Group’s interests, unless such Heads, Country Heads and Corporate subsidiary, ultimately surfacing at business relationships are consented Heads report on business operations the Board of the Group; to by the Board. issues to the Senior Management on 6. The development of any potential a monthly basis. Matters such as medico-legal cases are tracked and nursing issues, clinical/medical reported to Senior Management and incidents with lapses, adverse to the RMC on a quarterly basis. outcomes, potential legal issues Any significant risk exposures or and media exposure, are reported trends in terms of incident type or and addressed at the hospital case categorisation are highlighted quality meetings chaired by the to the Board/RMC quarterly; Hospital CEOs;

133 Governance STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

ADEQUACY AND REVIEW OF THE STATEMENT EFFECTIVENESS OF THE BY EXTERNAL AUDITORS GROUP’S RISK MANAGEMENT The external auditors have reviewed this AND INTERNAL CONTROL Statement on Risk Management and SYSTEMS Internal Control pursuant to the scope IHH’s Management is accountable to set out in Audit and Assurance Practice the Board for the implementation of Guide ("AAPG") 3, Guidance for Auditors the processes involved in identifying, on Engagements to Report on the evaluating and managing risk and internal Statement on Risk Management and control. In the financial year under review Internal Control included in the Annual and up to the date of approval of this Report issued by the Malaysian Institute Statement, the Board has received of Accountants (“MIA”), for inclusion in assurances from the Managing Director the annual report of the Group for the and Chief Executive Officer, as well as year ended 31 December 2018, and Chief Financial Officer that the Group’s reported to the Board that nothing has system of risk management and internal come to their attention that cause them control is operating adequately and to believe that the statement intended effectively, in all material aspects, based to be included in the annual report of on the risk management and internal the Group, in all material respects: control system of the Group. (a) has not been prepared in accordance Taking into consideration the information with the disclosures required and assurances given, the Board is by paragraphs 41 and 42 of the satisfied with the adequacy, integrity and Statement on Risk Management effectiveness of the Group’s system of and Internal Control: Guidelines risk management and internal control. for Directors of Listed Issuers, or No material losses, contingencies or (b) is factually inaccurate. uncertainties have arisen from any inadequacy or failure of the Group’s AAPG 3 does not require the external system of internal control that would auditors to consider require separate disclosure in the whether the Directors’ Statement on Group’s Annual Report. The measures Risk Management and Internal Control to protect and enhance shareholder covers all risks and controls, or to value and business sustainability form an opinion on the adequacy continue to be a focal point of the and effectiveness of the Group’s risk Group, and therefore, the system of management and internal control system risk management and internal control including the assessment and opinion by across the Group continues to be the Board of Directors and management subject to enhancement, validation thereon. The auditors are also not and regular review. required to consider whether the processes described to deal with material The Group’s system of risk management internal control aspects of any significant and internal controls does not cover problems disclosed in the annual report associates, joint ventures and its new will, in fact, remedy the problems. subsidiary, Fortis Healthcare Limited and its group of companies, which was acquired on 13 November 2018, near to the Group's financial year ended 31 December 2018.

134 IHH Healthcare Berhad | Annual Report 2018 SUSTAINABILITY GOVERNANCE Governance

We have established a governance The Managing Director and Chief The Sustainability Working Group (SWG), structure for sustainability, thereby Executive Officer (MD and CEO) is on the other hand, implements the creating lines of accountability within the mandated by the Board to oversee the sustainability initiatives and monitors organisation to oversee, implement and delegation of the duties of the SMC in the performance of the operations assess IHH’s efforts to strengthen its relation to sustainability reporting. against the key performance indicators sustainability performance. or targets. The sustainability champions The key role of the SMC is to monitor at each hospital represent their hospital The governance structure is helmed by the key performance indicators and in their respective country’s SWG. A the Board of Directors (Board), and the targets that underpin the Group’s Group-wide Sustainability Taskforce Sustainability Management Committee sustainability strategy. Chaired by the supports the SWG in addressing specific (SMC) acts as an advisor to the Board Group Chief Operating Officer, the SMC sustainability matters with real or in fulfilling the Board’s duty of overseeing oversees IHH’s sustainability strategy in potential impact on the Group. and managing sustainability matters. keeping with the Group’s objectives.

The figure below illustrates the different constituents of IHH’s governance structure for sustainability and the existing lines of accountability within the organisation.

IHH BOARD OF DIRECTORS

MD and CEO RISK MANAGEMENT COMMITTEE

Sustainability Risk Reporting incorporated into ERM

Head, Risk Management Sustainability Management Committee

Secretariat to SMC Sustainability Taskforce

SMC forms Group-wide tackforce as necessary

Parkway Pantai and IMU Parkway Pantai Acibadem Global/Continental Sustainability Working Group Sustainability Working Group Sustainability Working Group Sustainability Working Group (Malaysia) (Singapore) (Turkey) (India)

135 Governance INVESTOR RELATIONS REPORT

Our commitment to effective shareholder engagement IHH Healthcare (“IHH”) recognises the importance of effective communication between the company, its shareholders and the general public. The group believes good, clear and credible communication will foster confidence and a better understanding of our business.

The Company has a dedicated through these platforms keeps the Group. This information includes IHH’s Investor Relations and Corporate investment community abreast of the corporate profile, board members, senior Communications Department that Company’s strategic developments management profiles, share information, facilitates communication between and financial performance. Furthermore, financial results, dividend policy, annual the Company and the investment analyst briefings and media briefings reports, media releases, investor community. We achieve this through are conducted when the Group’s presentations, Annual General Meeting active dialogue and by leveraging quarterly and annual results are released. details and corporate governance-related strategic communication platforms to policies. Our Investor Relations team provide comprehensive insights about On a quarterly basis, the Investor ensures that the investor relations (“IR”) the Group’s corporate developments, Relations Department updates the Board section of the website is regularly financial performance and material on shareholding details, investor relations updated with the latest Group operations affecting the Group. activities, recommendations by analysts disclosures. Any queries or concerns and comments from the investment regarding the Group can be directed The Investor Relations function builds community, as well as on commentary to the Investor Relations Department at relationships between the Group and on share price performance. [email protected]. its investment community via various channels in Malaysia and internationally. The Board has endorsed the Investor ANALYST BRIEFINGS FOR We engage with shareholders through Relations Policy, which aims to enforce QUARTERLY AND ANNUAL our Annual Reports and Annual General IHH’s commitment towards maintaining effective and timely communication FINANCIAL RESULTS Meeting. In addition, we provide timely ANNOUNCEMENT and consistent disclosures and material with our shareholders and stakeholders. announcements on Bursa Malaysia The Policy mandates that the Group In 2018, IHH’s Senior Management Securities Berhad (“Bursa Malaysia”) updates its stakeholders on all material conducted four analyst briefings and and Singapore Exchange Limited (“SGX”). developments. The policy also outlines one media briefing to discuss and guidelines on the processes and communicate the Group’s quarterly The Senior Management of the Company procedures to be followed to ensure and annual financial results. This was is actively involved in the Group’s the successful implementation of our on top of our timely financial results extensive investor relations programme. Investor Relations programme. announcements on a quarterly and This includes organising regular in-house annual basis to Bursa Malaysia and meetings and facilitating hospital visits, GROUP CORPORATE WEBSITE SGX. To widen our reach towards the investment community, recordings of investor non-deal roadshows (“NDRs”) The Group’s corporate website at these conference calls and materials and conference calls, both locally and www.ihhhealthcare.com offers related to the results announcements internationally, with financial analysts, stakeholders a dedicated platform for were uploaded to the Group’s IR website. institutional shareholders and fund accessing essential information of the managers. Proactive communication The materials included:

• A press release with key operational and financial highlights for the quarter; • A consolidated quarterly financial report; • A set of presentation slides with operational and financial information; and • A recording of the briefing for on-demand playback.

In addition, the investment community can obtain regulatory announcements made by IHH to Bursa Malaysia and SGX on IHH’s Investor Relations webpage at www.ihhhealthcare.com/ investor-relations.html.

136 IHH Healthcare Berhad | Annual Report 2018 Governance

TABLE OF KEY EVENTS

Key Events 2018 2017 2016 2015 2014 Annual and Quarterly Results Announcement: Teleconference & Webcasts 4 4 4 4 4 Investor Conferences & Non-deal Roadshows 9 8 12 18 17 Number of analysts/fund managers met (in-house, conference calls and road shows) 247 292 443 591 436

CONFERENCES AND ROADSHOWS IHH’s Senior Management, fronted by performance, material operations In 2018, investor relations worked with Managing Director and CEO, Dr Tan affecting the Group and the business the major brokerage firms to conduct See Leng, and Investor Relations outlook. The Senior Management also stakeholder engagements through reached out directly to our shareholders took the opportunity to solicit feedback investor conferences and non-deal and investors to provide updates about and perceptions of the Group from the roadshows, locally and internationally. the Group’s strategic developments, investment community. latest quarterly operational and financial

Date Conference Names Location Organisers 10–11 Jan 36th J.P. Morgan Healthcare Conference: San Francisco J.P. Morgan Emerging Markets 1–2 Mar Deutsche Bank London NDR London Deutsche Bank 5–9 Mar DBS US & Canada NDR New York, Boston, Toronto DBS Bank 19–20 Mar Credit Suisse Investment Conference Hong Kong Credit Suisse 24 Jul Investor outreach on Fortis Healthcare Transaction Hong Kong IHH Healthcare Berhad 30 Jul CIMB Kuala Lumpur NDR Kuala Lumpur CIMB Securities Ltd 2 Aug Investor outreach on Fortis Healthcare Transaction London IHH Healthcare Berhad 12–13 Sep 25th CLSA Investors’ Forum Hong Kong CLSA Singapore Pte Ltd 29 Nov Morgan Stanley 17th Annual Asia Pacific Summit Singapore Morgan Stanley

ANALYST COVERAGE The Company is closely tracked by the investment community. As at 30 March 2019, 26 analysts provided coverage on IHH, reflecting strong interest from sell side equity research houses, both domestic and abroad.

No Analyst Coverage No Analyst Coverage 1 Affin Securities Sdn Bhd 14 KAF Seagroatt & Campbell Sec Sdn Bhd 2 AmInvestment Bank Berhad 15 K&N Kenanga Holdings Bhd 3 Bank of America Merrill Lynch Global Research 16 M & A Securities Sdn Bhd 4 BIMB Securities Sdn Bhd 17 Macquarie Securities Ltd 5 CIMB Securities Pte Ltd 18 Maybank Kim Eng Securities 6 Citigroup Global Markets Asia 19 MIDF Amanah Investment Bank Bhd 7 CLSA Singapore Pte Ltd 20 Morgan Stanley 8 Credit Suisse Holdings USA Inc 21 Nomura Securities Co Ltd/Tokyo 9 DBS Vickers Securities 22 Public Investment Bank 0 Deutsche Bank AG/Hong Kong 23 RHB Research Institute Sdn Bhd 11 Goldman Sachs India Sec Pte Ltd 24 TA Securities Holdings Bhd 12 Hong Leong Investment Bank Bhd 25 UBS Securities Malaysia Sdn 13 J.P. Morgan Securities (Malaysia) Sdn Bhd 26 UOB Kay Hian Pte Ltd

137 Other Information ADDITIONAL COMPLIANCE INFORMATION

The following information is provided in existence during the financial year (iv) LTIP of IMU Health Sdn Bhd in accordance with Paragraph 9.25 of ended 31 December 2018 ("FY 2018"): (“IMU LTIP”) for a duration of ten years the Main Market Listing Requirements from 25 August 2011 and expiring (“MMLR”) of Bursa Malaysia Securities (i) Long Term Incentive Plan (“LTIP”) on 24 March 2021; and of our Company (“IHH LTIP”) for a Berhad (“Bursa Securities”) as set out (v) Enterprise Option Scheme (“EOS”) duration of ten years from 25 March in Part A of Appendix 9C thereto. of our Company for a duration of ten 2011 and expiring on 24 March 2021; years from 22 June 2015 and expiring 1. UTILISATION OF PROCEEDS (ii) LTIP of Parkway Holdings Limited on 21 June 2025. There were no proceeds raised by (“Parkway LTIP”) for a duration of ten the Company from corporate proposals years from 21 April 2011 and expiring (IHH LTIP, Parkway LTIP, Pantai LTIP, during the financial year ended on 24 March 2021; and IMU LTIP are collectively referred 31 December 2018. (iii) LTIP of Pantai Holdings Berhad to as “LTIPs”) (now known as Pantai Holdings Sdn Brief details on the numbers of LTIP 2. EMPLOYEE SHARE SCHEMES Bhd) (“Pantai LTIP”) for a duration units/EOS options granted, vested and of ten years from 24 May 2011 and The following are employee share outstanding since the commencement expiring on 24 March 2021; schemes established by our Group and of the LTIPs and EOS until FY 2018 are as follows:

LTIPs EOS Total number of LTIP units/EOS options granted 64,573,415 44,030,000

Total number of LTIP units/EOS options surrendered/exercised 52,375,045 1,033,000

Total number of LTIP units/EOS options lapsed/cancelled/opted out 8,047,370 4,341,000

Total number of LTIP units/EOS options outstanding 4,151,000 38,656,000

Granted to Directors and Chief Executive LTIPs EOS Aggregate number of LTIP units/EOS options granted 16,404,000 23,194,000

Aggregate number of LTIP units/EOS options surrendered/exercised 14,409,000 123,000

Aggregate number of LTIP units/EOS options outstanding 1,995,000 23,071,000

In accordance with the Bye Laws for the the LTIPs and EOS respectively. None of LTIP units and EOS options granted in LTIPs and EOS respectively, the total our Directors and Senior Management, aggregate to Executive Directors and number of shares which may be issued either singly or collectively with persons Senior Management of the Company under the LTIPs and EOS to the eligible connected with them, owns 20% or more are 27% and 61% of the total number participants, including Executive Directors of the total number of issued shares of of LTIP units and EOS options granted and Senior Management of the Company, our Company. respectively. shall not exceed the aggregate of 2%, of our Company’s total number of issued For FY 2018, the actual percentage of There were no LTIP units and EOS shares. Additionally, the total number LTIP units and EOS options granted options granted to the Non-Executive of shares which may be issued under to Executive Directors and Senior Directors since the commencement LTIP units and EOS options granted Management of the Company was dates of the LTIPs and EOS until FY 2018. to a participant, who either singly or 76% and 59% of the total number of Details of the LTIP units and EOS collectively with persons connected with LTIP units and EOS options granted options exercised during the financial him or her owns 20% or more of the total in 2018 respectively. year are disclosed in Note 22 of the number of issued shares of our Company, Since the commencement of the LTIP financial statements. shall not exceed in aggregate 10% of the and EOS, the actual percentage of total number of shares to be issued under

138 IHH Healthcare Berhad | Annual Report 2018 Other Information

3. AUDIT AND NON-AUDIT FEES The amount of audit and non-audit fees paid or payable to external auditors by the Group and the Company respectively for the financial year ended 31 December 2018 are as follows:

Audit fees Non-Audit fees Group Company Group Company RM’000 RM’000 RM’000 RM’000 KPMG PLT 1,212 458 810 810

Affliates of KPMG PLT 7,850 424 859 -

Total 9,062 882 1,669* 810

* Approximately RM862,000 of the non-audit fees are related to limited review of the Group’s financial statements for acquisition projects.

Services rendered by KPMG PLT are regarding the governance of share consideration price (per share) not prohibited by regulatory and other Acibadem Saglik Yatirimlari Holding paid under the Share Purchase professional requirements and are A.S. and its group (“Acibadem Agreement (referred to in Section based on globally practiced guidelines Holding”). Under the Shareholders’ 15.6(ii)(a) of the Company’s on auditors’ independence. Agreement, MAA, HSA and any Prospectus dated 2 July 2012) relatives or heirs of these individuals (adjusted for any impact of 4. MATERIAL CONTRACTS or their permitted transferees holding subsequent capital increases INVOLVING DIRECTORS’, shares in Acibadem Holding or in its or other changes to the capital) CHIEF EXECUTIVE’S AND group companies (“Aydinlar”) have an (“Original Number”), then the number MAJOR SHAREHOLDERS’ option to convert Acibadem Holding of IHH Shares which the Acibadem INTERESTS shares that they hold representing up Holding shares will convert into will Save as disclosed below and in the to 15% of the issued share capital in be 20% more than the Original financial statements, there were no Acibadem Holding into ordinary Number. Likewise if the conversion material contracts entered into by the shares in IHH (“IHH Shares”) during would result in 20% or less than the Company and/or its subsidiaries involving a period of ten years from 24 January Original Number, then the number Directors’, Chief Executive’s and Major 2012, provided that such option is of IHH Shares converted into will be Shareholders’ interests subsisting as at exercisable only after the initial public 20% less than the Original Number. 31 December 2018 or entered into since offering of IHH (“Aydinlar Option”). Subject to Aydinlar exercising the the end of the previous financial year: The relative prices of the Acibadem Aydinlar Option, Bagan Lalang will (i) A shareholders’ agreement dated Holding shares to be transferred and have a similar right to convert a 23 December 2011 (“Shareholders’ the IHH Shares to be issued upon any certain class of Acibadem Holding Agreement”) was entered into among exercise of the Aydinlar Option will be shares held by Bagan Lalang, the Company, Integrated Healthcare based on the fair market valuation of representing up to 15% of the issued Hastaneler Turkey Sdn Bhd (“IHH these shares at the time the Aydinlar share capital in Acibadem Holding, Turkey”), Bagan Lalang Ventures Sdn Option is exercised. If the fair market into new IHH Shares (“Bagan Lalang Bhd (“Bagan Lalang”), Hatice Seher valuation of these shares will result in Option”). The Bagan Lalang Option Aydinlar (“HSA”) and Mehmet Ali a conversion of Aydinlar’s Acibadem shall mirror exactly the Aydinlar Aydinlar (“MAA”), whereby the parties Holding shares into 20% or more than Option and shall be subject to have agreed on, among others, the the number of IHH Shares, compared identical terms and procedures. rights and obligations of the parties to if Aydinlar’s Acibadem Holding shares were converted by using the

139 Other Information ADDITIONAL COMPLIANCE INFORMATION

On 8 October 2018, Aydinlar and (ii) Bagan Lalang served a notice (The Aydinlar Acquisition, Bagan Lalang Bagan Lalang exercised the Aydinlar requesting to convert a total of Acquisition and Bagan Lalang Transfer Option and Bagan Lalang Option 229,199,999 Class B shares in are collectively referred to as the respectively as follows: Acibadem Holding ("Acibadem “Acquisition”) Class B Shares"), representing (i) MAA and HSA served a notice approximately 15% equity interest The Acquisition was completed on requesting to convert a total of in Acibadem Holding, for 30 November 2018 and consequently 229,199,999 Class A shares in 262,246,412 new IHH Shares IHH, through its wholly-owned indirect Acibadem Holding (“Acibadem ("Bagan Lalang Acquisition"). subsidiary, IHH Turkey, increased its Class A Shares”) (i.e. 212,719,852 equity interest in Acibadem Holding Acibadem Class A Shares for In view that the exercise of the Bagan from 60% to approximately 90%. MAA and 16,480,147 Acibadem Lalang Option will result in Bagan Class A Shares for HSA), Lalang’s shareholding in Acibadem 5. RECURRENT RELATED representing approximately Holding to be reduced from 229,200,000 PARTY TRANSACTIONS 15% equity interest in Acibadem Acibadem Class B Shares to 1 Acibadem The recurrent related party transactions Holding, for 262,246,412 new Class B Share, Bagan Lalang has of a revenue nature incurred by the ordinary shares in the Company concurrently, with the completion of Group for the financial year ended (“new IHH Shares”) ("Aydinlar the Bagan Lalang Option, transferred 31 December 2018 did not exceed the Acquisition"); and its remaining 1 Acibadem Class B Share threshold prescribed under Paragraph to IHH Turkey at no consideration 10.09(1) of the MMLR. (“Bagan Lalang Transfer”) to facilitate a complete exit of its investment in Acibadem Holding.

DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors are required by the Companies Act 2016 to prepare financial statements for each financial year. These are to be made out in accordance with the applicable approved accounting standards and to give a true and fair view of the state of affairs of the Group and the Company at the end of the financial year as well as of the results and cash flows of the Group and Company for the financial year.

In preparing the financial statements, the Directors have adopted suitable accounting policies and applied them consistently. The Directors have also made judgment and estimates that are on a going concern basis as the Directors have a reasonable expectation, having made enquiries that the Group and Company have resources to continue in operational existence for the foreseeable future.

The Directors have overall responsibility for taking such steps necessary to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

The Statement by Directors pursuant to Section 251(2) of the Companies Act 2016 is set out in the financial statements.

140 IHH Healthcare Berhad | Annual Report 2018 FINANCIAL STATEMENTS

142 Directors’ Report 149 Statement by Directors 149 Statutory Declaration 150 Independent Auditors’ Report 155 Statements of Financial Position 157 Statements of Profit or Loss and Other Comprehensive Income 158 Statements of Changes in Equity 164 Statements of Cash Flows 167 Notes to the Financial Statements Financial Statements Directors’ Report for the year ended 31 December 2018

The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2018.

PRINCIPAL ACTIVITIES The Company is principally engaged in investment holding, whilst the principal activities of the subsidiaries are as stated in Note 46 to the financial statements. There has been no significant change in the nature of these activities during the financial year.

SUBSIDIARIES The details of the Company’s subsidiaries are disclosed in Note 46 to the financial statements.

RESULTS Group Company RM’000 RM’000 Profit for the year attributable to: Owners of the Company 627,687 243,773 Non-controlling interests (137,827) – 489,860 243,773

RESERVES AND PROVISIONS There were no material transfers to or from reserves and provisions during the financial year under review except as disclosed in the financial statements.

DIVIDENDS Since the end of the previous financial year, the Company paid a first and final single tier cash dividend of 3 sen per ordinary share amounting to RM247,338,000 for the financial year ended 31 December 2017 on 18 July 2018.

The Directors have proposed a first and final single tier cash dividend of 3 sen per ordinary share for the financial year ended 31 December 2018 totalling RM263,079,000, which is subject to shareholders’ approval at the forthcoming Annual General Meeting.

DIRECTORS OF THE COMPANY Directors who served during the financial year until the date of this report are:

Dato’ Mohammed Azlan Bin Hashim Dr. Tan See Leng Mehmet Ali Aydinlar Chang See Hiang Rossana Annizah Binti Ahmad Rashid Shirish Moreshwar Apte Bhagat Chintamani Aniruddha Koji Nagatomi Takeshi Saito* Jill Margaret Watts Appointed on 4 April 2018 Kuok Khoon Ean Retired on 28 May 2018 Quek Pei Lynn (Alternate Director to Bhagat Chintamani Aniruddha)

* Takeshi Saito ceased to be an alternate director to Koji Nagatomi on 28 March 2019 and was appointed as a Director of the Company on 28 March 2019

The names of Directors of subsidiaries are set out in the subsidiaries’ statutory accounts and the said information is deemed incorporated herein by such reference and made a part hereof.

142 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

DIRECTORS’ INTERESTS The interests and deemed interests in the ordinary shares, units convertible into ordinary shares, options over ordinary shares, other units and perpetual securities of the Company and of its related corporations (other than wholly owned subsidiaries) of those who were Directors at year end (including the interests of the spouses or children of the Directors who themselves are not Directors of the Company) as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares At At Options 31 December 1 January 2018 exercised Bought Sold 2018 Interests in the Company Dr. Tan See Leng –– Direct 10,453,800 1,248,000 – (3,500,000) 8,201,800

Mehmet Ali Aydinlar –– Direct 176,202,000 652,000 243,390,132* – 420,244,132 –– Deemed 88,910,861 – 18,856,280* – 107,767,141

Chang See Hiang –– Direct 100,000 – – – 100,000

Number of ordinary shares of TL1.00 each At At Options 31 December 1 January 2018 exercised Bought Sold 2018 Interests in subsidiaries Acıbadem Sağlık Yatirimlari Holding A.Ş. (“ASYH”) Mehmet Ali Aydinlar –– Direct 354,533,087 – – (212,719,852)* 141,813,235 –– Deemed 27,466,913 – – (16,480,147)* 10,986,766

Acıbadem Sağlık Hizmetleri ve Ticaret A.Ş. (“ASH”) Mehmet Ali Aydinlar –– Direct 1 – – – 1 –– Deemed 1 – – – 1

Acıbadem Poliklinikleri A.Ş. Mehmet Ali Aydinlar –– Direct 1 – – – 1 –– Deemed 3 – – – 3

Acıbadem Proje Yönetimi A.Ş. Mehmet Ali Aydinlar –– Direct 1 – – – 1

Aplus Hastane Otelcilik Hizmetleri A.Ş. Mehmet Ali Aydinlar –– Direct 1 – – – 1 –– Deemed 2 – – – 2

143 Financial Statements Directors’ Report for the year ended 31 December 2018

DIRECTORS’ INTERESTS (continued) Number of ordinary shares of TL2.00 each At At 1 January Options 31 December 2018 exercised Bought Sold 2018 Interests in a subsidiary International Hospital Istanbul A.Ş. Mehmet Ali Aydinlar –– Direct 1 – – – 1 –– Deemed 1 – – – 1

Number of units convertible into ordinary shares At At 1 January Lapsed/ 31 December 2018 Granted Exercised cancelled 2018 Interests in the Company Long Term Incentive Plan (“LTIP”) Dr. Tan See Leng 1,233,000 1,323,000 (1,248,000) – 1,308,000

Mehmet Ali Aydinlar 660,000 657,000 (652,000) – 665,000

Number of options over ordinary shares At At 1 January Lapsed/ 31 December 2018 Granted Exercised cancelled 2018 Interests in the Company Enterprise Option Scheme (“EOS”) Dr. Tan See Leng 14,229,000 6,432,000 – – 20,661,000

Mehmet Ali Aydinlar – 2,283,000 – – 2,283,000

Number of units At At 1 January Options 31 December 2018 exercised Bought Sold 2018 Interests in a subsidiary Parkway Life Real Estate Investment Trust (“PLife REIT”) Chang See Hiang –– Direct 300,000 – – – 300,000

Shirish Moreshwar Apte –– Direct 150,000 – – – 150,000

Value of perpetual securities held At At 1 January 31 December 2018 Bought Sold 2018 USD’000 USD’000 USD’000 USD’000 Perpetual securities issued by a subsidiary Parkway Pantai Limited Dr. Tan See Leng 3,000 – – 3,000

* New shares of the Company issued to Mehmet Ali Aydinlar in exchange for the acquisition of approximately his 15% interest in ASYH

144 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

DIRECTORS’ INTERESTS (continued) Except as disclosed above, none of the other Directors holding office as at 31 December 2018 had any interest in the ordinary shares, options over ordinary shares, units convertible into ordinary shares, other units and perpetual securities of the Company and of its related corporations during the financial year.

DIRECTORS’ BENEFITS Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than those fees included in the aggregate amount of remuneration received or due and receivable by Directors as shown in the financial statements or the fixed salary of a full-time employee of the Company or of related corporations) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest, other than certain Directors who have significant financial interests in companies which traded with certain companies in the Group in the ordinary course of business as disclosed in Note 41 to the financial statements.

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate apart from the issue of the LTIP and EOS as disclosed in Note 22.

ISSUE OF SHARES AND DEBENTURES During the financial year, the Company issued:

(i) 4,994,000 new ordinary shares pursuant to the surrender of vested LTIP units;

(ii) 226,000 new ordinary shares pursuant to the exercise of vested EOS options; and

(iii) 524,492,824 new ordinary shares for the acquisition of additional approximately 30% interest in Acibadem Saglik Yatirimlari Holding A.Ş. (“ASYH”).

Upon completion of the above, the issued and fully paid number of shares of the Company increased from 8,239,583,639 to 8,769,296,463 as at 31 December 2018.

There were no other changes in the issued and paid-up capital of the Company, and no other debenture were issued during the financial year.

OPTIONS GRANTED OVER UNISSUED SHARES No options were granted to any person to take up unissued shares of the Company during the financial year apart from the issue of share options pursuant to the following scheme:

EOS At an extraordinary general meeting held on 15 June 2016, the Company’s shareholders approved the establishment of the EOS for granting of non-transferrable options to eligible employees of the Group any time during the existence of the scheme.

The salient features and the other terms of the EOS are, inter alia, as follows: i. Eligible employees are executive directors and selected senior management employed by the Group who has been selected by the Board at its direction, if as at the offer date, the employee:

– has attained the age of 18 years;

– is in the full time employment and payroll of the Group including contract employees or in the case of a director, is on the board of directors of the Group; and

– falls within such other categories and criteria that the Board may from time to time at its absolute discretion determine. ii. The aggregate number of shares to be issued under the EOS shall not exceed 2% of the issued and paid-up ordinary share capital (excluding treasury shares) of the Company.

145 Financial Statements Directors’ Report for the year ended 31 December 2018

OPTIONS GRANTED OVER UNISSUED SHARES (continued)

EOS (continued) iii. The EOS shall be in force for a period of 10 years from 22 June 2015. iv. The EOS options granted in each year will vest in the participants over a three year period, in equal proportion (or substantially equal proportion) each year. v. The exercise price for the EOS option granted shall be determined by the Board which shall be based on the 5-day weighted average market price of the underlying shares a day immediately preceding the date of offer with a discount of not more than 10% or such other percentage of discount as may be permitted by Bursa Securities or any other relevant regulatory from time to time (subject to the Board’s discretion to grant the discount). vi. Each EOS option gives a conditional right to the participant to receive 1 Share, upon exercise of the option and subject to the payment of the exercise price. vii. The EOS options are granted if objective performance targets or such other objective conditions of exercise that the Board may determine from time to time on a yearly basis and which are met. viii. The total number of EOS options which may be allocated to a participant who either singly or collectively with persons connected with him owns 20% or more of the issued and paid-up capital of the Company shall not exceed in aggregate 10% of the total number of Shares to be issued under the EOS. ix. Options granted but not yet vested and any unexercised options shall lapse with immediate effect and cease to be exercisable if the participant is no longer in employment with the Group, by way of termination, disqualification or resignation or in the case of a director, cease or disqualified to be a Director of the Group or the participant becomes a bankrupt, unless the Board determines otherwise.

LTIP At an extraordinary general meeting held on 25 March 2011, the Company’s shareholders approved the establishment of the LTIP scheme for the granting of non-transferrable convertible units to eligible employees of the Group at any time during the existence of the scheme.

The salient features and the other terms of the LTIP are, inter alia, as follows: i. Eligible employees are employees that are in the full time employment and in the payroll of the Group including contract employees for at least 6 months or persons that fall within other categories or criteria that the Board may determine from time to time, at its absolute discretion. ii. The aggregate number of shares to be issued under the LTIP shall not exceed 2% of the issued and paid-up ordinary share capital of the Company. iii. The LTIP shall be in force for a period of 10 years from 25 March 2011. iv. The LTIP units granted in each year will vest in the participants over a three year period, in equal proportions each year. v. Each unit of LTIP is entitled to be converted to 1 ordinary share of the Company after listing of the Company. vi. Eligible employees who are offered LTIP units but have elected to opt out of the scheme will receive cash LTIP units instead which will be redeemed by the Company over a three year period in equal proportions each year. vii. Options granted but not yet vested will be cancelled with immediate effect and cease to be exercisable if the participant is no longer in employment with the Group, by way of termination, disqualification or resignation or in the case of an executive director, cease or disqualified to be a Director or the participant becomes a bankrupt, unless the Board determines otherwise.

146 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

OPTIONS GRANTED OVER UNISSUED SHARES (continued) During the year, the Group acquired Fortis Healthcare Limited and its subsidiaries (“Fortis Group”) on 13 November 2018. Fortis Group has share-based payment schemes and the salient features and terms of these schemes are disclosed in Note 22 to the financial statements.

The options granted during the financial year is disclosed in Note 22 to the financial statements.

INDEMNITY AND INSURANCE COSTS During the financial year, the Group purchased a Directors’ and Officers’ Liability Insurance for the Group’s directors and officers with total insured limit of RM400 million per occurrence and in the aggregate. The insurance premium for the Group is RM470,000.

OTHER STATUTORY INFORMATION Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that:

(i) all known bad debts have been written off and adequate provision made for doubtful debts, and

(ii) any current assets which were unlikely to be realised in the ordinary course of business have been written down to an amount which they might be expected so to realise.

At the date of this report, the Directors are not aware of any circumstances:

(i) that would render the amount written off for bad debts, or the amount of the provision for doubtful debts, in the Group and in the Company inadequate to any substantial extent, or

(ii) that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading, or

(iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate, or

(iv) not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Group and of the Company misleading.

At the date of this report, there does not exist:

(i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person, or

(ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable, within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

In the opinion of the Directors, except for those disclosed in the financial statements, the financial performance of the Group and of the Company for the financial year ended 31 December 2018 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.

147 Financial Statements Directors’ Report for the year ended 31 December 2018

SIGNIFICANT EVENTS The significant events during the financial year are as disclosed in Notes 42, 43 and 45 to the financial statements.

SUBSEQUENT EVENT The event subsequent to the end of the reporting period is as disclosed in Note 51 to the financial statements.

CONSOLIDATION OF SUBSIDIARIES WITH DIFFERENT FINANCIAL YEAR END Pursuant to Section 247(7) of the Companies Act 2016, the Company has applied and has been granted approval by the Companies Commission of Malaysia for the following subsidiaries of the Company to continue to have or to adopt a financial year which does not coincide with the Company in relation to the financial year ended 31 December 2018:

• Parkway Healthcare India Private Limited • Andaman Alliance Healthcare Limited • Ravindranath GE Medical Associates Private Limited (“RGE”) and its subsidiaries • Continental Hospitals Private Limited (“Continental”) and its subsidiaries • Fortis Healthcare Limited (“Fortis”) and its subsidiaries

The details of the subsidiaries of RGE, Continental and Fortis are disclosed in Note 46 to financial statements.

AUDITORS The auditors, KPMG PLT, have indicated their willingness to accept re-appointment.

The auditors’ remuneration is disclosed in Note 30 to the financial statements.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Dato’ Mohammed Azlan Bin Hashim Director

Dr. Tan See Leng Director

1 April 2019

148 IHH Healthcare Berhad | Annual Report 2018 Statement by Directors pursuant to Section 251(2) of the Companies Act 2016 Financial StatementsFinancial

In the opinion of the Directors, the financial statements set out on pages 155 to 297 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia so as to give a true and fair view of the financial positions of the Group and of the Company as of 31 December 2018 and of their financial performances and cash flows for the financial year then ended.

The Directors would like to draw your attention to Note 50. Given the ongoing regulatory investigations, any further adjustments/ disclosures, if required, would be made in the financial statements of the Group as appropriate when the outcome is known.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Dato’ Mohammed Azlan Bin Hashim Director

Dr. Tan See Leng Director

1 April 2019

STATUTORY DECLARATION pursuant to Section 251(1)(b) of the Companies Act 2016

I, Low Soon Teck, the officer primarily responsible for the financial management of IHH Healthcare Berhad, do solemnly and sincerely declare that the financial statements set out on pages 155 to 297 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the declaration to be true, and by virtue of the Statutory Declarations Act 1960.

Subscribed and solemnly declared by the abovenamed Low Soon Teck, Passport No.: K0764500H at Kuala Lumpur in the Federal Territory on 1 April 2019.

Low Soon Teck

Before me:

Commissioner for Oaths Kuala Lumpur, Malaysia

149 Financial Statements Independent Auditors’ Report to the Members of IHH Healthcare Berhad (Company No. 901914-V) (Incorporated In Malaysia)

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Opinion We have audited the financial statements of IHH Healthcare Berhad, which comprise the statements of financial position as at 31 December 2018 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and notes to the financial statements, including a summary of significant accounting policies as set out on pages 155 to 297.

In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion section of our report, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 December 2018, and of their financial performances and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

Basis for Qualified Opinion As disclosed in Note 50 to the financial statements, the Group completed its acquisition of Fortis Healthcare Limited (“Fortis”) and its subsidiaries (“Fortis Group”) on 13 November 2018. Prior to the acquisition, an investigation report by an independent external legal firm was submitted to the former Fortis board, relating to systematic lapses/override of internal controls. Significant findings, amongst others, highlighted the placement of inter-corporate deposits and existence of possible related parties connected with former controlling shareholders of Fortis which may require appropriate reassessment by Fortis Group on the claims from, or transactions with, such parties. The Fortis Group had also initiated enquiries of the management of the entities in the Fortis Group that were impacted in respect of the matters investigated by the external legal firm.

In addition, there are ongoing investigations by the Securities and Exchange Board of India (“SEBI”) and the Serious Fraud Investigation Office (“SFIO”), Ministry of Corporate Affairs of India. On 17 October 2018 and 21 December 2018, SEBI had issued interim orders which, amongst others, stating that certain transactions were structured by some identified entities, which were prima facie fictitious and fraudulent in nature, resulting in inter-alia diversion of funds by former controlling shareholders of Fortis.

Due to the ongoing process of the various inquiries/investigations (including the need for any additional investigations by Fortis), the external auditors of Fortis are unable to determine if there are any regulatory non-compliances and additional adjustments/disclosures which may be necessary as a result of further findings of the ongoing or future regulatory/internal investigations and the consequential impact, if any, on the consolidated financial statements of Fortis. Any consequential adjustments may be recorded either as adjustments to the assets acquired and liabilities assumed in the acquisition which will have an impact to the provisional goodwill recognised by the Group on acquisition of Fortis under the purchase price allocation exercise, or as post-acquisition adjustments to be recognised in the financial statements of the Group in the period the adjustments are known.

Independence and Other Ethical Responsibilities We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

150 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (continued) a. Impairment of the goodwill and intangible assets – Group Refer to Note 2(f) and 2(g) – Significant accounting policies: “Goodwill on consolidation” and “Intangible assets” and Note 6 – Goodwill on consolidation and intangible assets.

The key audit matter As at 31 December 2018, the Group’s goodwill and intangible assets of RM13.9 billion represents 30.9% of the Group’s total assets.

In view of the financial significance of the balance, the inherent uncertainties and the level of judgement required by us in evaluating the Group’s assumptions included within the cash flow model and the fair value less costs to sell model, impairment of goodwill and intangible assets is a key audit matter.

The Group conducted an impairment assessment on all its cash-generating units (“CGUs”) to identify if the recoverable amount is less than the carrying amount, indicating that the goodwill and intangible assets may be impaired. The Group determined the recoverable amounts of CGUs using value in use model involving cash flow projections with a terminal value or the fair value less costs to sell model. Key assumptions within these models include revenue growth, EBITDA margin, long-term growth rates, discount rates and an appropriate control premium percentage.

During the year, an impairment charge of RM66.2million was recognised in the profit or loss of the Group in respect of one cash generating unit where its recoverable amount is less than the Group’s carrying amount.

How the matter was addressed in our audit We performed the following audit procedures, among others:

• We assessed the appropriateness of using value in use or fair value less costs to sell models as the basis for determining the CGUs’ recoverable amounts.

• We evaluated the Group’s cash flow projections by performing retrospective assessment of the key assumptions driving the business units’ cash flow projections, in particular revenue growth and EBITDA margin, to the latest internal board approved budget and plan, external market data, the historical accuracy of the Group’s estimates in the previous years and our understanding of the future prospects of the business or investments.

• We worked with our own valuation specialists to challenge the discount rates, long-term growth rates and control premium percentage, and comparing these assumptions to economic and industry forecasts.

• We performed our own sensitivity of the impairment calculation to changes in the key assumptions used by the Group to assess the extent of the changes that would be required for the assets to be impaired.

• We also assessed the adequacy of key assumptions disclosure in the Group’s financial statements. b. Basis of consolidation of investment in Fortis Healthcare Limited as a subsidiary – Group Refer to Note 2(a) – Significant accounting policies: “Basis of consolidation”, Note 7 – Investment in subsidiaries, and Note 43 – Acquisition of subsidiaries.

The key audit matter During the year, the Group acquired 31.1% equity interest in Fortis Healthcare Limited (“Fortis”) for a consideration of INR 40 billion (approximately RM2.3 billion).

Given that the interest in Fortis is at 31.1%, assessing whether the Group obtained control to direct the investment in Fortis requires judgement and to classify as a subsidiary on the date of acquisition is a key audit matter.

The Group assessed that with majority representation on the board of Fortis by virtue of share subscription agreement, the Group has control over the board of Fortis and accordingly, the investment in Fortis was classified as a subsidiary on the date of acquisition.

151 Financial Statements Independent Auditors’ Report to the Members of IHH Healthcare Berhad (Company No. 901914-V) (Incorporated In Malaysia) (continued)

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (continued) b. Basis of consolidation of investment in Fortis Healthcare Limited as a subsidiary – Group (continued) How the matter was addressed in our audit We performed the following audit procedures, among others:

• We evaluated the appropriateness of management’s assessment on when the Group obtained control over Fortis by examining of the terms and conditions of the share subscription agreement and other related documents in relation to the subscription of 31.1% equity interest.

• We performed an independent discussion and collaborate with the Company’s India-based external lawyers who were involved in the drafting and finalising of the share subscription agreement, on the terms and conditions of the share subscription agreements and related local laws and regulations.

• We have also assessed the adequacy of the disclosures for the classification as a subsidiary and acquisition in the Group’s financial statements. c. Impairment of investment in a subsidiary – Company Refer to Note 2(a)(i) – Significant accounting policies: “Subsidiaries” and Note 7 – Investment in subsidiaries.

The key audit matter During the year, the Company continues to face challenges in its investment in Turkey, in particular the continuing depreciation of Turkish Lira currency over the years. This increased the risk that the Company’s RM5.5 billion cost of investment in the subsidiary that holds the Turkey investment, exceeds its recoverable amount.

We identified the carrying value of the Company’s investment in the subsidiary as a key audit matter as it required us to exercise judgement in evaluating the appropriateness of the assumptions used which include revenue growth, EBITDA margin, long-term growth rate, discount rate and EBITDA multiple, in deriving the recoverable amount of this investment.

Based on the impairment assessment performed by management using the recoverable amount as the greater of value in use (“VIU”) or fair value less costs to sell (“FVLCTS”), an impairment loss of RM2.3 billion was charged to the profit or loss of the Company for the current year.

How the matter was addressed in our audit We performed the following audit procedures, among others:

• We assessed the Company’s assessment on indicators of impairment in investment in subsidiary.

• We assessed the appropriateness of using value in use (“VIU”) or fair value less costs to sell (“FVLCTS”) models as the basis for determining the subsidiary’s recoverable amount and checked the mathematical accuracy of these models.

• We evaluated the subsidiary’s VIU and FVLCTS models by performing retrospective assessment of the key assumptions driving the subsidiary’s cash flow projections, in particular revenue growth, EBITDA and EBITDA margin, to the latest internal board approved budget and plan, external market data, the historical accuracy of the subsidiary’s estimates in the previous years and our understanding of the future prospects of the investment.

• We worked with our own valuation specialists to challenge the discount rate, long-term growth rate and EBITDA multiple, and comparing these assumptions to economic and industry forecasts.

• We performed our own sensitivity of the impairment calculation to changes in the key assumptions used by the subsidiary to assess the extent of the changes that would be required for the assets to be impaired.

• We also assessed the adequacy of key assumptions disclosure in the Company’s financial statements.

152 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (continued) Information Other than the Financial Statements and Auditors’ Report Thereon The Directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon.

Our opinion on the financial statements of the Group and of the Company does not cover the annual report and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the annual report and, in doing so, consider whether the annual report is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of the annual report, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the ability of the Group and of the Company to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of the Group and of the Company.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.

• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Group or of the Company to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern.

153 Financial Statements Independent Auditors’ Report to the Members of IHH Healthcare Berhad (Company No. 901914-V) (Incorporated In Malaysia) (continued)

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (continued)

Auditors’ Responsibilities for the Audit of the Financial Statements (continued) • Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that gives a true and fair view.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditors’ report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the subsidiaries of which we have not acted as auditors are disclosed in Note 46 to the financial statements.

OTHER MATTER This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

KPMG PLT Chong Dee Shiang (LLP0010081-LCA & AF 0758) Approval Number: 02782/09/2020 J Chartered Accountants Chartered Accountant

Petaling Jaya, Malaysia 1 April 2019

154 IHH Healthcare Berhad | Annual Report 2018 Statements of Financial Position as at 31 December 2018 Financial StatementsFinancial

Group Company 2018 2017 2018 2017 Note RM’000 RM’000 RM’000 RM’000 Assets Property, plant and equipment 3 14,605,200 13,141,621 1,429 1,722 Prepaid lease payments 4 1,017,810 1,036,631 – – Investment properties 5 3,310,429 3,109,985 – – Goodwill on consolidation 6 11,829,197 10,692,198 – – Intangible assets 6 2,109,136 2,278,442 – – Investment in subsidiaries 7 – – 16,286,644 15,650,650 Interests in associates 8 710,036 8,445 – – Interests in joint ventures 9 115,334 139,118 – – Other financial assets 10 18,668 15,052 – – Trade and other receivables 14 112,420 65,462 – 12,229 Tax recoverable 285,866 37,552 – – Derivative assets 26 722 12,422 – – Deferred tax assets 11 463,898 229,855 – – Total non-current assets 34,578,716 30,766,783 16,288,073 15,664,601

Development properties 12 80,729 75,027 – – Inventories 13 350,729 281,914 – – Trade and other receivables 14 1,959,970 1,504,882 15,330 15,041 Amounts due from subsidiaries 15 – – 2,546,875 14,848 Tax recoverable 18,020 37,627 – – Other financial assets 10 347,185 160,235 179,646 – Derivative assets 26 9,315 13,406 – – Cash and cash equivalents 16 7,763,398 6,078,603 1,280,302 1,564,893 10,529,346 8,151,694 4,022,153 1,594,782 Assets classified as held for sale 17 6,448 7,004 – – Total current assets 10,535,794 8,158,698 4,022,153 1,594,782 Total assets 45,114,510 38,925,481 20,310,226 17,259,383

The notes on pages 167 to 297 are an integral part of these financial statements.

155 Financial Statements Statements of Financial Position as at 31 December 2018 (continued)

Group Company 2018 2017 2018 2017 Note RM’000 RM’000 RM’000 RM’000 Equity Share capital 18 19,427,586 16,462,994 19,427,586 16,462,994 Other reserves 19 (1,665,515) 1,478,287 61,207 54,779 Retained earnings 4,231,930 3,948,881 729,004 730,716 Total equity attributable to owners of the Company 21,994,001 21,890,162 20,217,797 17,248,489 Perpetual securities 20 2,157,943 2,158,664 – – Non-controlling interests 4,355,141 1,851,904 – – Total equity 28,507,085 25,900,730 20,217,797 17,248,489

Liabilities Loans and borrowings 21 9,330,942 6,948,053 – – Employee benefits 22 98,938 52,442 122 49 Trade and other payables 25 691,264 969,909 – – Derivative liabilities 26 12,168 3,742 – – Deferred tax liabilities 11 991,273 1,011,220 – – Total non-current liabilities 11,124,585 8,985,366 122 49

Bank overdrafts 16 81,215 68 – – Loans and borrowings 21 1,123,108 689,987 – – Employee benefits 22 130,547 94,033 1,603 797 Trade and other payables 25 3,751,568 2,795,827 11,367 7,605 Derivative liabilities 26 5,931 22,991 – – Amounts due to subsidiaries 15 – – 78,589 814 Tax payable 390,471 436,479 748 1,629 Total current liabilities 5,482,840 4,039,385 92,307 10,845 Total liabilities 16,607,425 13,024,751 92,429 10,894 Total equity and liabilities 45,114,510 38,925,481 20,310,226 17,259,383

The notes on pages 167 to 297 are an integral part of these financial statements.

156 IHH Healthcare Berhad | Annual Report 2018 STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 31 December 2018 Financial StatementsFinancial

Group Company 2018 2017 2018 2017 Note RM’000 RM’000 RM’000 RM’000 Revenue 27 11,520,932 11,142,639 2,577,204 606,107 Other operating income 372,910 806,268 14,582 202,712 Inventories and consumables (2,210,445) (2,104,958) – – Purchases and contracted services (948,729) (909,660) – – Staff costs 28 (4,538,075) (4,529,742) (43,109) (35,879) Depreciation and impairment of property, plant and equipment 3 (880,701) (915,769) (859) (865) Amortisation and impairment of intangible assets and prepaid lease payments 6 (58,457) (62,311) – – Operating lease expenses (334,316) (328,510) (2,186) (2,238) Other operating expenses (1,380,182) (1,293,159) (2,322,652) (73,157) Finance income 29 174,943 151,839 25,726 18,689 Finance costs 29 (978,822) (794,304) (2,042) (8) Share of profits of associates (net of tax) 11,515 1,543 – – Share of profits of joint ventures (net of tax) 1,897 577 – – Profit before tax 30 752,470 1,164,453 246,664 715,361 Income tax expense 33 (262,610) (334,625) (2,891) (4,335) Profit for the year 489,860 829,828 243,773 711,026

Other comprehensive income, net of tax Items that may be reclassified subsequently to profit or loss Foreign currency translation differences from foreign operations (349,175) (790,190) 8 (27) Hedge of net investments in foreign operations (78,542) 21,344 – – Net change in fair value of available-for-sale financial instruments – (319,205) – (467) Cash flow hedge 4,249 3,160 – – 31 (423,468) (1,084,891) 8 (494)

Items that will not be reclassified subsequently to profit or loss Remeasurement of defined benefit liabilities (11,241) (12,245) – – Net change in fair value of fair value through other comprehensive income financial instruments (FVOCI) 759 – 759 – 31 (10,482) (12,245) 759 – Total comprehensive income/(expense) for the year 55,910 (267,308) 244,540 710,532

Profit attributable to: Owners of the Company 627,687 969,953 243,773 711,026 Non-controlling interests (137,827) (140,125) – – Profit for the year 489,860 829,828 243,773 711,026

Total comprehensive income/(expense) attributable to: Owners of the Company 377,349 (6,989) 244,540 710,532 Non-controlling interests (321,439) (260,319) – – Total comprehensive income/(expense) for the year 55,910 (267,308) 244,540 710,532

Earnings per ordinary share (sen): Basic 34 6.54 11.31 Diluted 34 6.53 11.30

The notes on pages 167 to 297 are an integral part of these financial statements.

157 Financial Statements Statements of Changes in Equity for the year ended 31 December 2018

Attributable to owners of the Company Non-distributable Distributable Foreign Share Fair currency Non- Share Share option value Revaluation Hedge Capital Legal translation Retained Perpetual controlling capital premium reserve reserve reserve reserve reserve reserve reserve earnings Total securities interests Total equity Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2017 8,231,700 8,185,160 46,206 320,154 85,890 14,071 (1,157,882) 42,601 2,941,612 3,276,228 21,985,740 – 1,907,417 23,893,157 Foreign currency translation differences from foreign operations – – – – – – – – (658,527) – (658,527) – (131,663) (790,190) Hedge of net investments in foreign operations – – – – – – – – 7,609 – 7,609 – 13,735 21,344 Net change in fair value of available-for-sale financial instruments – – – (320,154) – – – – – – (320,154) – 949 (319,205) Cash flow hedge – – – – – 1,127 – – – – 1,127 – 2,033 3,160 Remeasurement of defined benefit liabilities – – – – – – – – – (6,997) (6,997) – (5,248) (12,245) Total other comprehensive (expense)/income for the year 31 – – – (320,154) – 1,127 – – (650,918) (6,997) (976,942) – (120,194) (1,097,136) Profit for the year – – – – – – – – – 969,953 969,953 – (140,125) 829,828

Total comprehensive (expense)/income for the year – – – (320,154) – 1,127 – – (650,918) 962,956 (6,989) – (260,319) (267,308) Contributions by and distributions to owners of the Company –– Share options exercised 3,208 154 – – – – – – – – 3,362 – – 3,362 –– Share-based payment 22 – – 52,186 – – – – – – – 52,186 – – 52,186 –– Dividends to owners of the Company 35 – – – – – – – – – (247,171) (247,171) – – (247,171) 3,208 154 52,186 – – – – – – (247,171) (191,623) – – (191,623) Transfer to share capital and share premium on share options exercised 42,705 67 (42,772) – – – – – – – – – – – Cancellation of vested share options – – (661) – – – – – – 661 – – – – Acquisition of subsidiaries 43 – – – – – – – – – – – – 11,392 11,392 Disposal of a subsidiary 44 – – – – – – – – – – – – 766 766 Changes in ownership interests in subsidiaries 45 – – – – – 2 293,354 – (1,119) – 292,237 – 372,389 664,626 Issue of shares by subsidiaries to non-controlling interests – – – – – – – – – – – – 75,056 75,056 Recognition of put options granted to non-controlling interests 37 – – – – – – (103,924) – – – (103,924) – (57,516) (161,440) Changes in fair value of put options granted to non-controlling interests 37 – – – – – – (46,640) – – – (46,640) – 1,411 (45,229) Transfer per statutory requirements – – – – – – – 5,154 – (5,154) – – – – Issue of perpetual securities 20 – – – – – – – – – – – 2,120,025 – 2,120,025 Accrued perpetual securities distribution – – – – – – – – – (38,639) (38,639) 38,639 – – Dividends paid to non-controlling interests – – – – – – – – – – – – (198,692) (198,692) Total transactions with owners of the Company 45,913 221(1) 8,753 – – 2 142,790 5,154 (1,119) (290,303) (88,589) 2,158,664 204,806 2,274,881 Transfer in accordance with Section 618(2) of the Companies Act 2016 (2) 8,185,381 (8,185,381) – – – – – – – – – – – – At 31 December 2017 16,462,994 – 54,959 – 85,890 15,200 (1,015,092) 47,755 2,289,575 3,948,881 21,890,162 2,158,664 1,851,904 25,900,730

1 Share premium arose from the exercise of employee option scheme before 31 January 2017, being the effective date of the Companies Act 2016. 2 In accordance with Section 618 of Companies Act 2016, any amount standing to the credit of the share premium account has become part of the Company’s share capital. The Company has twenty-four months upon the commencement of Companies Act 2016 on 31 January 2017 to utilise the credit.

158 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

159 Financial Statements Statements of Changes in Equity for the year ended 31 December 2018 (continued)

Attributable to owners of the Company Non-distributable Distributable Foreign Share Fair currency Non- Share option value Revaluation Hedge Capital Legal translation Retained Perpetual controlling capital reserve reserve reserve reserve reserve reserve reserve earnings Total securities interests Total equity Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2018 16,462,994 54,959 – 85,890 15,200 (1,015,092) 47,755 2,289,575 3,948,881 21,890,162 2,158,664 1,851,904 25,900,730 Foreign currency translation differences from foreign operations – – – – – – – (215,086) – (215,086) – (134,089) (349,175) Hedge of net investments in foreign operations – – – – – – – (27,985) – (27,985) – (50,557) (78,542) Net change in fair value of FVOCI financial instruments – – 759 – – – – – – 759 – – 759 Cash flow hedge – – – – 1,514 – – – – 1,514 – 2,735 4,249 Remeasurement of defined benefit liabilities – – – – – – – – (9,540) (9,540) – (1,701) (11,241) Total other comprehensive income/(expense) for the year 31 – – 759 – 1,514 – – (243,071) (9,540) (250,338) – (183,612) (433,950) Profit for the year – – – – – – – – 627,687 627,687 – (137,827) 489,860

Total comprehensive income/(expense) for the year – – 759 – 1,514 – – (243,071) 618,147 377,349 – (321,439) 55,910 Contributions by and distributions to owners of the Company –– Share options exercised 1,282 – – – – – – – – 1,282 – – 1,282 –– Share-based payment 22 – 38,909 – – – 17 – – – 38,926 – 38 38,964 –– Dividends to owners of the Company 35 – – – – – – – – (247,338) (247,338) – – (247,338) 1,282 38,909 – – – 17 – – (247,338) (207,130) – 38 (207,092) Transfer to share capital on share options exercised 31,395 (31,395) – – – – – – – – – – – Cancellation of vested share options – (1,094) – – – – – – 1,094 – – – – Acquisitions of subsidiaries 43 – – – – – – – – – – – 2,653,008 2,653,008 Changes in ownership interests in subsidiaries 45 2,931,915 – – – 1 (3,258,468) – (3) – (326,555) – 408,897 82,342 Issue of shares by subsidiaries to non-controlling interests – – – – – (203) – – – (203) – 11,563 11,360 Changes in fair value of put options granted to non-controlling interests 37 – – – – – 347,073 – – – 347,073 – (50,739) 296,334 Transfer per statutory requirements – – – – – – 3,767 – (3,767) – – – – Payment of coupon on perpetual securities 20 – – – – – (849) – – – (849) (86,567) – (87,416) Accrued perpetual securities distribution 20 – – – – – – – – (85,846) (85,846) 85,846 – – Dividends paid to non-controlling interests – – – – – – – – – – – (198,091) (198,091) Total transactions with owners of the Company 2,964,592 6,420 – – 1 (2,912,430) 3,767 (3) (335,857) (273,510) (721) 2,824,676 2,550,445 Reclassification – – (759) – – – – – 759 – – – – At 31 December 2018 19,427,586 61,379 – 85,890 16,715 (3,927,522) 51,522 2,046,501 4,231,930 21,994,001 2,157,943 4,355,141 28,507,085

The notes on pages 167 to 297 are an integral part of these financial statements.

160 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

161 Financial Statements Statements of Changes in Equity for the year ended 31 December 2018 (continued)

Attributable to owners of the Company Non-distributable Distributable Foreign Share currency Fair Share Share option translation value Retained Total capital premium reserve reserve reserve earnings equity Company Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2017 8,231,700 8,185,160 46,206 (153) 467 266,200 16,729,580 Foreign currency translation differences from foreign operations – – – (27) – – (27) Net change in fair value of available-for-sale financial instruments – – – – (467) – (467) Total other comprehensive expense for the year – – – (27) (467) – (494) Profit for the year – – – – – 711,026 711,026

Total comprehensive (expenses)/income for the year – – – (27) (467) 711,026 710,532 Contributions by and distributions to owners of the Company –– Share options exercised 3,208 154 – – – – 3,362 –– Share-based payment – – 52,186 – – – 52,186 –– Dividends to owners of the Company 35 – – – – – (247,171) (247,171) 3,208 154 52,186 – – (247,171) (191,623) Transfer to share capital and share premium on share options exercised 42,705 67 (42,772) – – – – Cancellation of vested share options – – (661) – – 661 – Total transactions with owners of the Company 45,913 221(1) 8,753 – – (246,510) (191,623) Transfer in accordance with Section 618(2) of the Companies Act 2016 (2) 8,185,381 (8,185,381) – – – – – At 31 December 2017 16,462,994 – 54,959 (180) – 730,716 17,248,489

The notes on pages 167 to 297 are an integral part of these financial statements.

162 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

Attributable to owners of the Company Non-distributable Distributable Foreign Share currency Fair Share option translation value Retained Total capital reserve reserve reserve earnings equity Company Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2018 16,462,994 54,959 (180) – 730,716 17,248,489 Foreign currency translation differences from foreign operations – – 8 – – 8 Net change in fair value through other comprehensive income financial instruments – – – 759 – 759 Total other comprehensive income for the year – – 8 759 – 767 Profit for the year – – – – 243,773 243,773

Total comprehensive income for the year – – 8 759 243,773 244,540 Contributions by and distributions to owners of the Company –– Share options exercised 1,282 – – – – 1,282 –– Share-based payment – 38,909 – – – 38,909 –– Issue of new shares 2,931,915 – – – – 2,931,915 –– Dividends to owners of the Company 35 – – – – (247,338) (247,338) 2,933,197 38,909 – – (247,338) 2,724,768 Transfer to share capital on share options exercised 31,395 (31,395) – – – – Cancellation of vested share options – (1,094) – – 1,094 – Total transactions with owners of the Company 2,964,592 6,420 – – (246,244) 2,724,768 Reclassification – – – (759) 759 – At 31 December 2018 19,427,586 61,379 (172) – 729,004 20,217,797

163 Financial Statements Statements of Cash Flows for the year ended 31 December 2018

Group Company 2018 2017 2018 2017 Note RM’000 RM’000 RM’000 RM’000 Cash flows from operating activities Profit before tax 752,470 1,164,453 246,664 715,361 Adjustments for: Dividend income 27 (3,639) (2,128) (2,577,204) (606,107) Finance income 29 (174,943) (151,839) (25,726) (18,689) Finance costs 29 978,822 794,304 2,042 8 Depreciation and impairment of property, plant and equipment 3 880,701 915,769 859 865 Amortisation and impairment of intangible assets and prepaid lease payments 6 58,457 62,311 – – Impairment loss made/(written back): –– Investment in a subsidiary – – 2,295,921 (72) –– Goodwill 30 66,168 – – – –– Investment in a joint venture 30 33,353 – – – –– Trade and other receivables 30 (34,539) 11,066 – – –– Amounts due from associates 30 – (901) – – –– Amounts due from joint ventures 30 52 575 – – Write-off: –– Property, plant and equipment 30 1,219 2,874 – – –– Intangible assets 30 174 248 – – –– Inventories 30 1,903 5,137 – – –– Trade and other receivables 30 13,337 28,074 – – Gain on disposal of property, plant and equipment 30 (831) (15,349) (107) – Gain on disposal of a subsidiary 30 – (1,149) – – Gain on disposal of available-for-sale financial instruments –– quoted 30 – (554,500) – – –– unquoted 30 – (4,695) – (167) Realised gain on foreign exchange on return of capital by a foreign subsidiary 30 – – – (202,365) (Gain)/Loss on disposal of business units (2,925) 776 – – Change in fair value of investment properties 30 (74,192) (22,922) – – Provision for financial guarantee given to a joint venture’s loan 30 3,967 1,570 – – Share of profits of associates (net of tax) (11,515) (1,543) – – Share of profits of joint ventures (net of tax) (1,897) (577) – – Equity-settled share-based payment 22 38,964 52,186 11,309 12,069 Net unrealised foreign exchange differences (183,675) 108,751 (11,906) 38,308 Operating profit/(loss) before changes in working capital 2,341,431 2,392,491 (58,148) (60,789) Changes in working capital: Development properties (5,702) (46,040) – – Inventories (38,873) (39,097) – – Trade and other receivables (153,199) (71,731) 12,815 14,556 Trade and other payables 100,681 298,800 2,469 (4,338) Cash generated from/(used in) operations 2,244,338 2,534,423 (42,864) (50,571) Tax paid (380,080) (273,724) (3,835) (2,941) Net cash from/(used in) operating activities 1,864,258 2,260,699 (46,699) (53,512)

The notes on pages 167 to 297 are an integral part of these financial statements.

164 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

Group Company 2018 2017 2018 2017 Note RM’000 RM’000 RM’000 RM’000 Cash flows from investing activities Interest received 130,324 67,195 24,670 9,113 Acquisitions of subsidiaries, net of cash and cash equivalents acquired 43 (178,977) (6,734) – – Development and purchase of intangible assets 6 (14,511) (7,505) – – Purchase of property, plant and equipment (1,046,729) (1,498,377) (573) (450) Payment for prepaid lease (4,075) – – – Purchase of investment properties 5 (69,613) (207,926) – – Purchase of money market funds (178,652) – (178,652) – Net withdrawal of fixed deposits with tenor of more than 3 months 69,517 44,116 – – Net cash inflow/(outflow) from disposal of business units 42 2,925 (1,124) – – Proceeds from disposal of a subsidiary, net of cash and cash equivalents disposed 44 – (9) – – Proceeds from disposal of property, plant and equipment 8,109 33,419 107 – Proceeds from disposal of available-for-sale financial instruments –– quoted – 1,257,531 – – –– unquoted – 150,973 – 70,274 Proceeds from disposal of money market funds 5,370 – – – Proceeds from return of capital by a foreign subsidiary 7 – – – 692,302 Proceeds from liquidation of a subsidiary 7 – – – 598 Proceeds from redemption of redeemable preference shares by a subsidiary 7 – – – 260,000 Dividends received from money market funds 27 3,639 2,128 3,639 2,128 Dividends received from subsidiaries 27 – – 50,000 603,979 Dividends received from joint ventures 1,212 1,401 – – Dividends received from associates 13,849 563 – – Deposits placed in escrow account (1,970,800) – – – Repayment from subsidiaries – – 97,067 36,662 Net cash (used in)/from investing activities (3,228,412) (164,349) (3,742) 1,674,606

165 Financial Statements Statements of Cash Flows for the year ended 31 December 2018 (continued)

Group Company 2018 2017 2018 2017 Note RM’000 RM’000 RM’000 RM’000 Cash flows from financing activities Interest paid (363,147) (325,950) – – Proceeds from exercise of share options 1,282 3,362 1,282 3,362 Proceeds from loans and borrowings 4,036,562 1,789,126 – – Proceeds from issue of fixed rate medium term notes 128,542 185,139 – – Proceeds from issue of perpetual securities, net of transaction costs – 2,120,025 – – Repayment of loans and borrowings (2,352,671) (2,432,757) – – Loan from non-controlling interest of a subsidiary 2,454 – – – Payment of perpetual securities distribution (87,416) – – – Dividends paid to non-controlling interests (198,091) (198,692) – – Dividends paid to owners of the Company (247,338) (247,171) (247,338) (247,171) Acquisition of non-controlling interests (16,863) (7,149) – – Proceeds from dilution of interest in subsidiaries 13,745 671,775 – – Issue of shares by subsidiaries to non-controlling interests 11,360 75,056 – – Changes in pledged deposits (31) 7,769 – – Net cash from/(used in) financing activities 928,388 1,640,533 (246,056) (243,809)

Net (decrease)/increase in cash and cash equivalents (435,766) 3,736,883 (296,497) 1,377,285 Effect of exchange rate fluctuations on cash held 68,583 (82,412) 11,906 (38,231) Cash and cash equivalents at 1 January 6,077,746 2,423,275 1,564,893 225,839 Cash and cash equivalents at 31 December 5,710,563 6,077,746 1,280,302 1,564,893

Cash and cash equivalents Cash and cash equivalents included in the statements of cash flows comprise the following statements of financial position amounts:

Group Company 2018 2017 2018 2017 Note RM’000 RM’000 RM’000 RM’000 Cash and bank balances 4,166,127 4,886,821 1,227,914 1,288,920 Fixed deposits with tenor of 3 months or less 3,597,271 1,191,782 52,388 275,973 7,763,398 6,078,603 1,280,302 1,564,893 Less: –– Bank overdrafts (81,215) (68) – – –– Deposits placed in escrow account (1,970,800) – – – –– Cash collateral received (820) (789) – – Cash and cash equivalents 16 5,710,563 6,077,746 1,280,302 1,564,893

The notes on pages 167 to 297 are an integral part of these financial statements.

166 IHH Healthcare Berhad | Annual Report 2018 Notes to the Financial Statements Financial StatementsFinancial

IHH Healthcare Berhad is a company incorporated and domiciled in Malaysia. It is listed on Bursa Malaysia Securities Berhad and Singapore Exchange Securities Trading Limited. The address of the Company’s principal place of business and registered office is as follows:

Level 11, Block A Pantai Hospital Kuala Lumpur 8 Jalan Bukit Pantai 59100 Kuala Lumpur

The consolidated financial statements of the Company as at and for the financial year ended 31 December 2018 comprise the Company and its subsidiaries (together referred to as the “Group” or “IHH Group” and individually referred to as “Group entities”) and the Group’s interest in associates and joint ventures. The financial statements of the Company as at and for the financial year ended 31 December 2018 do not include other entities.

The Company is principally engaged in investment holding activities, whilst the principal activities of the subsidiaries are as stated in Note 46 to the financial statements. There has been no significant change in the nature of these activities during the financial year.

These financial statements were authorised for issue by the Board of Directors on 1 April 2019.

1. BASIS OF PREPARATION (a) Statement of compliance The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

The following are accounting standards, amendments and interpretations of the MFRSs framework that have been issued by the Malaysian Accounting Standards Board (“MASB”) but have not been adopted by the Group and the Company:

MFRSs, interpretations and amendments effective for annual periods beginning on or after 1 January 2019 • MFRS 16, Leases • IC Interpretation 23, Uncertainty over Income Tax Treatments • Amendments to MFRS 3, Business Combinations (Annual Improvements to MFRS Standards 2015 – 2017 Cycle) • Amendments to MFRS 9, Financial Instruments – Prepayment Features with Negative Compensation • Amendments to MFRS 11, Joint Arrangements (Annual Improvements to MFRS Standards 2015 – 2017 Cycle) • Amendments to MFRS 112, Income Taxes (Annual Improvements to MFRS Standards 2015 – 2017 Cycle) • Amendments to MFRS 119, Employee Benefits – Plan Amendment, Curtailment or Settlement • Amendments to MFRS 123, Borrowing Costs (Annual Improvements to MFRS Standards 2015 – 2017 Cycle) • Amendments to MFRS 128, Investments in Associates and Joint Ventures – Long-term Interests in Associates and Joint Ventures

MFRSs, interpretations and amendments effective for annual periods beginning on or after 1 January 2020 • Amendments to MFRS 3, Business Combinations – Definition of a Business • Amendments to MFRS 101, Presentation of Financial Statements and MFRS 108, Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Material

MFRSs, interpretations and amendments effective for annual periods beginning on or after 1 January 2021 • MFRS 17, Insurance Contracts

MFRSs, Interpretations and amendments effective for annual periods beginning on or after a date yet to be confirmed • Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128, Investments in Associates and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

167 Financial Statements Notes to the Financial Statements

1. BASIS OF PREPARATION (continued)

(a) Statement of compliance (continued) The Group and the Company plan to apply the abovementioned accounting standards, interpretations and amendments from the annual period beginning on 1 January 2019 for those accounting standards, interpretations and amendments, that are effective for annual periods beginning on or after 1 January 2019.

The Group and the Company do not plan to apply MFRS 17, Insurance Contracts that is effective for annual periods beginning on or after 1 January 2021 as it is not applicable to the Group and the Company.

The Group is still in the process of assessing the impact of the new MFRSs, amendments to and interpretations of MFRSs on the financial statements. The Group’s preliminary assessment of MFRS 16, which is expected to have a more significant impact on the Group, is as described below:

MFRS 16, Leases MFRS 16 replaces the guidance in MFRS 117, Leases, IC Interpretation 4, Determining whether an Arrangement contains a Lease, IC Interpretation 115, Operating Leases – Incentives and IC Interpretation 127, Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

MFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligations to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard which continues to be classified as finance or operating lease.

The Group had adopted the modified retrospective approach and elected to measure the right-of-use assets at an amount equal to the lease liability as at the date of initial application. The Group had completed a detailed assessment of the impact on its financial statements.

At 1 January 2019, the Group expects to recognise additional lease liabilities of RM1,751,919,000 with a corresponding right-of- use assets of RM1,751,919,000 pertaining to operating leases. In addition, leasehold lands and assets under finance lease arrangement (both currently recorded under the property, plant and equipment) and prepaid lease payments will be reclassified into right-of-use assets as at 1 January 2019.

(b) Basis of measurement The financial statements have been prepared on the historical cost basis other than as disclosed in Note 2.

(c) Functional and presentation currency These financial statements are presented in Ringgit Malaysia (“RM”), which is the Company’s functional currency. All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated.

168 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

1. BASIS OF PREPARATION (continued) (d) Use of estimates and judgements The preparation of financial statements in conformity with MFRSs requires the management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in the following notes:

Note 5 – measurement of the fair value of investment properties Note 6 – measurement of the recoverable amounts of cash-generating units Note 9 – measurement of the recoverable value of a joint venture Note 22 – measurement of share-based payment Note 23 and 24 – measurement of retirement benefits and employment termination benefits Note 25 – measurement of fair value of put options granted to non-controlling interests Note 43 – business combinations

2. SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to the periods presented in these financial statements and have been applied consistently by Group entities, unless otherwise stated.

Arising from the adoption of MFRS 15, Revenue from Contracts with Customers and MFRS 9, Financial Instruments, there are changes to the accounting policies of:

i) financial instruments; ii) revenue recognition; and iii) impairment losses of financial instruments

as compared to those adopted in previous financial statements. The impact arising from the changes are disclosed in Note 52.

(a) Basis of consolidation (i) Subsidiaries Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. The Group also considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return.

Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investment includes transaction costs.

169 Financial Statements Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(a) Basis of consolidation (continued) (ii) Business combinations Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group.

For new acquisitions, the Group measures the cost of goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus • the recognised amount of any non-controlling interests in the acquiree; plus • if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less • the net fair value of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets at the acquisition date.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

(iii) Acquisitions of non-controlling interests The Group accounts for all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.

(iv) Acquisitions from entities under common control Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for at the date that common control was established.

The assets and liabilities acquired under business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group, are recognised at the carrying amounts recognised previously in the Group controlling shareholders’ consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity and any resulting gain or loss is recognised directly in equity.

(v) Loss of control Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the subsidiary, any non- controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss.

If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity accounted investee or as an available-for-sale financial instruments depending on the level of influence retained.

170 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(a) Basis of consolidation (continued) (vi) Associates Associates are entities, in which the Group has significant influence, but not control, over the financial and operating policies.

Investments in associates are accounted for in the consolidated financial statements using the equity method less any impairment losses. The cost of the investment includes transaction costs. The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of the associates, after adjustments if any, to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

When the Group’s share of losses exceeds its interest in an associate, the carrying amount of that interest including any long-term investments is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation to fund the associate’s operations or has made payments on behalf of the associate.

When the Group ceases to have significant influence over an associate, any retained interest in the former associate at the date when significant influence is lost is measured at fair value and this amount is regarded as the initial carrying amount of a financial asset. The difference between the fair value of any retained interest plus proceeds from the interest disposed of and the carrying amount of the investment at the date when equity method is discontinued is recognised in profit or loss.

When the Group’s interest in an associate decreases but does not result in a loss of significant influence, any retained interest is not re-measured. Any gain or loss arising from the decrease in interest is recognised in profit or loss. Any gains or losses previously recognised in other comprehensive income are also reclassified proportionately to profit or loss.

Investments in associates are measured in the Company’s statement of financial position at cost less any impairment losses. The cost of investment includes transaction costs.

(vii) Joint arrangements Joint arrangements are arrangements of which the Group has joint control, established by contracts requiring unanimous consent for decisions about the activities that significantly affect the arrangements’ returns.

Joint arrangements are classified and accounted for as follows:

• A joint arrangement is classified as “joint operation” when the Group or the Company has rights to the assets and obligations for the liabilities relating to an arrangement. The Group and the Company account for each of its share of the assets, liabilities and transactions, including its share of those held or incurred jointly with other investors, in relation to the joint operation.

• A joint arrangement is classified as “joint venture” when the Group or the Company has rights only to the net assets of the arrangements. The Group accounts for its interest in the joint venture using the equity method. Investments in joint venture are measured in the Company’s statements of financial position at cost less any impairment losses and includes transaction costs.

(viii) Non-controlling interests Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and owners of the Company.

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(a) Basis of consolidation (continued) (ix) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions between subsidiaries in the Group, are eliminated in preparing the consolidated financial statements.

Unrealised gains arising from transactions with equity-accounted associates and joint ventures are eliminated against the investment to the extent of the Group’s interest in the investees. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Foreign currency (i) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the functional currency at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting date, except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of equity instruments where they are measured at fair value through other comprehensive income or a financial instrument designated as a cash flow hedge, which are recognised in other comprehensive income.

In the consolidated financial statements, when settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented in the foreign currency translation reserve (“FCTR”) in equity.

(ii) Foreign operations The assets and liabilities of foreign operations including goodwill and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the end of the reporting period. The income and expenses of foreign operations are translated to RM at exchange rates at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income and accumulated in the FCTR in equity. However, if the operation is a non-wholly owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of, such that control, significant influence or joint control is lost, the cumulative amount in the FCTR related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.

When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued) (c) Financial instruments Unless specifically disclosed below, the Group and the Company generally applied the following accounting policies retrospectively. Nevertheless, as permitted by MFRS 9, Financial Instruments, the Group and the Company have elected not to restate the comparatives.

(i) Recognition and initial measurement A financial asset or a financial liability is recognised in the statement of financial position when, and only when, the Group or the Company becomes a party to the contractual provisions of the instrument.

Current financial year A financial asset (unless it is a trade receivable without significant financing component) or a financial liability is initially measured at fair value plus or minus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issuance. A trade receivable without a significant financing component is initially measured at the transaction price.

An embedded derivative is recognised separately from the host contract where the host contract is not a financial asset, and accounted for separately if, and only if, the derivative is not closely related to the economic characteristics and risks of the host contract and the host contract is not measured at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

Previous financial year Financial instrument was recognised initially, at its fair value plus or minus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that were directly attributable to the acquisition or issue of the financial instrument.

An embedded derivative was recognised separately from the host contract and accounted for as a derivative if, and only if, it was not closely related to the economic characteristics and risks of the host contract and the host contract was not recognised as fair value through profit or loss. The host contract, in the event an embedded derivative was recognised separately, was accounted for in accordance with policy applicable to the nature of the host contract.

(ii) Financial instrument categories and subsequent measurement Financial assets Current financial year Categories of financial assets are determined on initial recognition and are not reclassified subsequent to their initial recognition unless the Group or the Company changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change of the business model.

(a) Amortised cost Amortised cost category comprises financial assets that are held within a business model whose objective is to hold assets to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The financial assets are not designated as fair value through profit or loss. Subsequent to initial recognition, these financial assets are measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

Interest income is recognised by applying effective interest rate to the gross carrying amount except for credit impaired financial assets (see note 2(o)(i)) where the effective interest rate is applied to the amortised cost.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(c) Financial instruments (continued) (ii) Financial instrument categories and subsequent measurement (continued) Financial assets (continued) Current financial year (continued) (b) Fair value through profit or loss All financial assets not measured at amortised cost or fair value through other comprehensive income as described above are measured at fair value through profit or loss. This includes derivative financial assets (except for a derivative that is a designated and effective hedging instrument). On initial recognition, the Group or the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at fair value through other comprehensive income as at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets categorised as fair value through profit or loss are subsequently measured at their fair value. Net gains or losses, including any interest or dividend income, are recognised in the profit or loss.

(c) Fair value through other comprehensive income (i) Debt investments Fair value through other comprehensive income category comprises debt investment where it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the debt investment, and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The debt investment is not designated as at fair value through profit or loss. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in other comprehensive income. On derecognition,gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

(ii) Equity investments This category comprises investment in equity that is not held for trading, and the Group and the Company irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an investment by investment basis. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of investment. Other net gains and losses are recognised in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are not reclassified to profit or loss.

All financial assets, except for those measured at fair value through profit or loss and equity investments measured at fair value through other comprehensive income, are subject to impairment assessment (see note 2(o)(i)).

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(c) Financial instruments (continued) (ii) Financial instrument categories and subsequent measurement (continued) Financial assets (continued) Previous financial year In the previous financial year, financial assets of the Group and the Company were classified and measured under MFRS 139, Financial Instruments: Recognition and Measurement as follows:

(a) Financial assets at fair value through profit or loss Fair value through profit or loss category comprised financial assets that were held for trading, including derivatives (except for a derivative that was a financial guarantee contract or a designated and effective hedging instrument), contingent consideration receivable in a business combination or financial assets that were specifically designated into this category upon initial recognition.

Derivatives that were linked to and must be settled by delivery of unquoted equity instruments whose fair values could not be reliably measured were measured at cost.

Other financial assets categorised as fair value through profit or loss were subsequently measured at their fair values with the gain or loss recognised in profit or loss.

(b) Held-to-maturity investments Held-to-maturity investments category comprised debt instruments that were quoted in an active market and the Group had the positive intention and ability to hold them to maturity.

Financial assets categorised as held-to-maturity investments were subsequently measured at amortised cost using the effective interest method.

(c) Loans and receivables Loans and receivables category comprised debt instruments and financial assets with fixed or determinable payments that were not quoted in an active market.

Financial assets categorised as loans and receivables were subsequently measured at amortised cost using the effective interest method.

(d) Available-for-sale financial instruments Available-for-sale category comprised investment in equity and debt securities instruments that were not held for trading.

Investments in equity instruments that did not have a quoted market price in an active market and whose fair value could not be reliably measured were measured at cost. Other financial assets categorised as available-for-sale were subsequently measured at their fair values with the gain or loss recognised in other comprehensive income, except for impairment losses, foreign exchange gains and losses arising from monetary items and gains and losses of hedged items attributable to hedge risks of fair value hedges which were recognised in profit or loss. On derecognition, the cumulative gain or loss recognised in other comprehensive income was reclassified from equity into profit or loss. Interest calculated for a debt instrument using the effective interest method was recognised in profit or loss.

All financial assets, except for those measured at fair value through profit or loss, were subject to impairment assessment (see Note 2(o)(i)).

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(c) Financial instruments (continued) (ii) Financial instrument categories and subsequent measurement (continued) Financial liabilities Current financial year Except for put options granted to non-controlling interests, categories of financial liabilities at initial recognition are as follows:

(a) Fair value through profit or loss Fair value through profit or loss category comprises financial liabilities that are derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument), contingent consideration in a business combination and financial liabilities that are specifically designated into this category upon initial recognition.

On initial recognition, the Group or the Company may irrevocably designate a financial liability that otherwise meets the requirements to be measured at amortised cost as at fair value through profit or loss:

(a) if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise;

(b) a group of financial liabilities or assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the Group’s key management personnel; or

(c) if a contract contains one or more embedded derivatives and the host is not a financial asset in the scope of MFRS 9, where the embedded derivative significantly modifies the cash flows and separation is not prohibited.

Financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair value with gains or losses, including any interest expense are recognised in the profit or loss.

For financial liabilities where it is designated as fair value through profit or loss upon initial recognition, the Group and the Company recognise the amount of change in fair value of the financial liability that is attributable to change in credit risk in the other comprehensive income and remaining amount of the change in fair value in the profit or loss, unless the treatment of the effects of changes in the liability’s credit risk would create or enlarge an accounting mismatch.

(b) Amortised cost Other financial liabilities not categorised as fair value through profit or loss, put options granted to non-controlling interests and compulsory convertible preference shares, are subsequently measured at amortised cost using the effective interest method.

Interest expense and foreign exchange gains and losses are recognised in the profit or loss. Any gains or losses on derecognition are also recognised in the profit or loss.

Put options granted to non-controlling interests The Group granted put options to the non-controlling interests in existing subsidiaries over their equity interests in those subsidiaries which provide for settlement in cash by the Group. The Group recognises a liability for the present value of the exercise price of the options. Subsequent to initial recognition, the Group recognises the changes in the carrying amount of the financial liabilities in equity.

Compulsory convertible preference shares (“CCPS”) CCPS are issued by a subsidiary, denominated in Indian Rupees and will be converted to share capital of the subsidiary at the option of the holder. Where the number of shares to be issued is not fixed, the CCPS is classified as a liability and initially recognised at its fair value and subsequent changes in fair value are recognised in profit or loss. Where the number of shares to be issued becomes fixed, the related CCPS tranche is reclassified to equity at its fair value on that date.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(c) Financial instruments (continued) (ii) Financial instrument categories and subsequent measurement (continued) Financial liabilities (continued) Previous financial year In the previous financial year, financial liabilities of the Group and the Company were subsequently measured at amortised cost other than those categorised as fair value through profit or loss.

Fair value through profit or loss category comprised financial liabilities that were derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument), contingent consideration payable in a business combination or financial liabilities that were specifically designated into this category upon initial recognition.

Derivatives that were linked to and must be settled by delivery of equity instruments that did not have a quoted price in an active market for identical instruments whose fair values otherwise could not be reliably measured were measured at cost.

Financial liabilities categorised as fair value through profit or loss were subsequently measured at their fair values with the gain or loss recognised in profit or loss.

(iii) Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

Current financial year Financial guarantees issued are initially measured at fair value. Subsequently, they are measured at higher of:

• the amount of the loss allowance; and • the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance to the principles of MFRS 15, Revenue from Contracts with Customers.

Liabilities arising from financial guarantees are presented together with other provisions.

Previous financial year In the previous financial year, fair value arising from financial guarantee contracts were classified as deferred income and was amortised to profit or loss using a straight-line method over the contractual period or, when there was no specified contractual period, recognised in profit or loss upon discharge of the guarantee. When settlement of a financial guarantee contract becomes probable, an estimate of the obligation was made. If the carrying value of the financial guarantee contract was lower than the obligation, the carrying value was adjusted to the obligation amount and accounted for as a provision.

(iv) Regular way purchase or sale of financial assets A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, using trade date or settlement date accounting in the current year.

Trade date accounting refers to:

(a) the recognition of an asset to be received and the liability to pay for it on the trade date, and

(b) derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a receivable from the buyer for payment on the trade date.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(c) Financial instruments (continued) (iv) Regular way purchase or sale of financial assets (continued) Settlement date accounting refers to:

(a) the recognition of an asset on the day it is received by the Group or the Company, and

(b) derecognition of an asset and recognition of any gain or loss on disposal on the day that is delivered by the Group or the Company.

Any change in the fair value of the asset to be received during the period between the trade date and the settlement date is accounted in the same way as it accounts for the acquired asset.

Generally, the Group or the Company applies settlement date accounting unless otherwise stated for the specific class of asset.

(v) Hedge accounting At inception of a designated hedging relationship, the Group and the Company document the risk management objective and strategy for undertaking the hedge.

The Group and the Company also document the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other.

(a) Cash flow hedge Current financial year A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with all, or a component of, recognised asset or liability or a highly probable forecast transaction and could affect the profit or loss. In a cash flow hedge, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income and accumulated in equity and the ineffective portion is recognised in profit or loss. The effective portion of changes in the fair value of the derivative that is recognised in other comprehensive income is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge.

Subsequently, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss in the same period or periods during which the hedged forecast cash flows affect profit or loss. If the hedged item is a non-financial asset or liability, the associated gain or loss recognised in other comprehensive income is removed from equity and included in the initial amount of the asset or liability. However, loss recognised in other comprehensive income that will not be recovered in one or more future periods is reclassified from equity into profit or loss immediately.

Cash flow hedge accounting is discontinued prospectively when the hedging instrument expires or is sold, terminated or exercised, the hedge is no longer highly effective, the forecast transaction is no longer expected to occur or the hedge designation is revoked. If the hedge is for a forecast transaction, the cumulative gain or loss on the hedging instrument remains in equity until the forecast transaction occurs. When hedge accounting for cash flow hedges is discontinued, the amount that has been accumulated in the hedging reserve and the cost of hedging reserve remains in equity until, for a hedge of a transaction resulting in recognition of a non-financial item, it is included in the non- financial item’s cost on its initial recognition or, for other cash flow hedges, it is reclassified to profit or loss in the same period or periods as the hedged expected future cash flows affect profit or loss.

If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in the hedging reserve and the cost of hedging reserve are immediately reclassified to profit or loss.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(c) Financial instruments (continued) (v) Hedge accounting (continued) (a) Cash flow hedge (continued) Previous financial year In the previous financial year, cost of hedging was expensed to profit or loss.

(b) Hedge of a net investment A hedge of a net investment is a hedge in the interest of the net assets of a foreign operation. In a net investment hedge, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income and the ineffective portion is recognised in profit or loss. The cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss on disposal of the foreign operation..

(vi) Derecognition A financial asset or part of it is derecognised when, and only when the contractual rights to the cash flows from the financial asset expire or transferred, or control of the asset is not retained or substantially all of the risks and rewards of ownership of the financial asset are transferred to another party. On derecognition of a financial asset, the difference between the carrying amount of the financial assets and the sum of consideration received (including any new asset obtained less any new liability assumed) is recognised in profit or loss.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. A financial liability is also derecognised when its terms are modified and the cash flows of the modified liability are substantially different, in which case, a few financial liability based on modified terms is recognised at fair value. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

(vii) Offsetting Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group or the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and liability simultaneously.

(d) Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset and any other cost directly attributable to bringing the asset to working condition for its intended use, and the cost of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour. For qualifying assets, borrowing cost is capitalised in accordance with the accounting policy on borrowing costs. Cost also may include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

The cost of property, plant and equipment recognised as a result of a business combination is based on fair value at acquisition date. The fair value of property is the estimated amount for which a property could be exchanged between knowledgeable, willing parties in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of other items of plant and equipment is based on the quoted market prices for similar items when available and replacement costs when appropriate.

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

179 Financial Statements Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(d) Property, plant and equipment (continued) (i) Recognition and measurement (continued) Property that is being constructed for future use as investment property is accounted for as property, plant and equipment until construction or development is complete, at which time it is reclassified as investment property and measured at fair value.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and is recognised net within “other operating income” or “other operating expenses” respectively in profit or loss.

(ii) Subsequent costs The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised to profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognised in the profit or loss as incurred.

(iii) Depreciation Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed, and if a component has a useful life that is different from the remainder of that asset, then that component is depreciated separately.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Freehold land is not depreciated. Property, plant and equipment under construction (construction-in-progress) are not depreciated until the assets are ready for their intended use.

The estimated useful lives for the current and comparative periods are as follows:

Leasehold land Remaining term of the lease Buildings 5 – 60 years Hospital and medical equipment, renovations, furniture and fittings and equipment 3 – 25 years Laboratory and teaching equipment 2 – 10 years Motor vehicles 4 – 8 years

Depreciation methods, useful lives and residual values are reviewed at the end of the reporting period, and adjusted as appropriate.

(e) Leased assets (i) Finance lease Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

Leasehold land which in substance is a finance lease is classified as property, plant and equipment, or as investment property if held to earn rental income or for capital appreciation or for both.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(e) Leased assets (continued) (ii) Operating lease Leases, where the Group does not assume substantially all the risks and rewards of ownership are classified as operating leases and the leased assets are not recognised in the statement of financial position.

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred.

Prepayment for leasehold land which in substance is an operating lease is classified as prepaid lease payments, and are amortised over the term of the lease.

Determining whether an arrangement contains a lease At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. This will be the case if the following two criteria are met:

• the fulfilment of the arrangement is dependent on the use of a specific asset or assets; and • the arrangement contains a right to use the asset(s).

At inception or upon reassessment of the arrangement, the Group separates payments and other considerations required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently, the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the Group’s incremental borrowing rate.

(f) Goodwill on consolidation Goodwill is measured at cost less any accumulated impairment losses. In respect of equity-accounted associates and joint ventures, the carrying amount of goodwill is included in the carrying amount of the investment and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity-accounted associates and joint ventures.

(g) Intangible assets (i) Research and development Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and has sufficient resources to complete development and to use or sell the asset.

The expenditure capitalised includes the cost of materials, direct labour and overheads costs that are directly attributable to prepare the asset for its intended use. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. Other development expenditure is recognised in profit or loss as incurred.

Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.

181 Financial Statements Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(g) Intangible assets (continued) (ii) Other intangible assets Customer relationships that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses.

Brand names and hospital licenses that have indefinite lives and other intangible assets that are not yet available for use are stated at cost less impairment losses.

(iii) Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss as incurred.

(iv) Amortisation Amortisation is calculated based on the cost of an asset less its residual value.

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use.

The estimated useful lives for the current and comparative periods are as follows:

Customer relationships 5 – 20 years Capitalised development costs 5 – 10 years Brand use rights remaining term of the right Favourable lease arrangements remaining term of the lease Other intangibles 3 – 10 years

Amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted, if appropriate.

Goodwill, intangible assets with indefinite useful lives and intangible assets not yet available for use are not amortised but are tested for impairment annually and whenever there is an indication that they may be impaired.

(h) Investment properties (i) Recognition and measurement Investment properties are properties which are held to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes.

Investment properties are measured initially at cost and subsequently at fair value with any change therein recognised in profit or loss for the period in which they arise.

The fair value is determined based on internal valuation or independent professional valuation. Independent professional valuation is obtained annually for material investment properties.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self- constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs.

An investment property is derecognised on its disposal, or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the investment property is recognised in profit or loss in the period in which the item is derecognised.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(h) Investment properties (continued) (ii) Reclassification to/from investment property When an item of property, plant and equipment is transferred to investment property following a change in its use, any difference arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fair value is recognised directly in equity as a revaluation of property, plant and equipment. However, if a fair value gain reverses a previous impairment loss, the gain is recognised in profit or loss. Upon disposal of an investment property, any surplus previously recorded in equity is transferred to retained earnings; the transfer is not made through profit or loss.

When the use of a property changes such that it is reclassified as property, plant and equipment or inventories, its fair value at the date of reclassification becomes its cost for subsequent accounting.

(i) Development property The cost of property under development comprises specifically identified costs, including acquisition costs, development expenditure, borrowing costs and other related expenditure that can be allocated on a reasonable basis to the property under development. Borrowing costs payable on loans funding a development property are also capitalised, on a specific identification basis, as part of the cost of the development property until the completion of development.

Development property is stated at the lower of cost and net realisable value. Net realisable value represents the estimated selling price in the ordinary course of business less estimated costs of completion and selling expenses.

(j) Inventories Inventories are measured at the lower of cost and net realisable value.

Cost is calculated using the weighted average cost formula and comprises all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Due allowance is made for all damaged, expired and slow moving items.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any allowance for write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any allowance for write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

(k) Contract asset/Contract liability A contract asset is recognised when the Group’s or the Company’s right to consideration is conditional on something other than the passage of time. A contract asset is subject to impairment in accordance to MFRS 9, Financial Instruments (see Note 2(o)(i)).

A contract liability is stated at cost and represents the obligation of the Group or the Company to transfer goods or services to a customer for which consideration has been received (or the amount is due) from the customers.

(l) Contract cost (i) Incremental cost of obtaining a contract The Group or the Company recognises incremental costs of obtaining contracts when the Group or the Company expects to recover these costs.

183 Financial Statements Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(l) Contract cost (continued) (ii) Costs to fulfill a contract The Group or the Company recognises a contract cost that relate directly to a contract or to an anticipated contract as an asset when the cost generates or enhances resources of the Group or the Company, will be used in satisfying performance obligations in the future and it is expected to be recovered.

These contract costs are initially measured at cost and amortised on a systematic basis that is consistent with the pattern of revenue recognition to which the asset relates. An impairment loss is recognised in the profit and loss when the carrying amount of the contract cost exceeds the expected revenue less expected cost that will be incurred. Where the impairment condition no longer exists or has improved, the impairment loss is reversed to the extent that the carrying amount of the contract cost does not exceed the amount that would have been recognised had there been no impairment loss recognised previously.

(m) Cash and cash equivalents Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in fair value with original maturities of three months or less, and are used by the Group in the management of their short term commitments. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.

(n) Assets classified as held for sale Assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale or distribution to owners rather than through continuing use, are classified as held for sale or distribution.

Immediately before classification as held for sale or distribution, the assets, or components of a disposal group, are remeasured in accordance with the Group’s accounting policies. Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less cost of disposal.

Any impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, and investment property, which continue to be measured in accordance with the Group’s accounting policies. Impairment losses on initial classification as held for sale or distribution and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.

Intangible assets and property, plant and equipment once classified as held for sale or distribution are not amortised or depreciated. In addition, equity accounting of associates and joint ventures ceases once classified as held for sale or distribution.

(o) Impairment (i) Financial assets Unless specifically disclosed below, the Group and the Company generally applied the following accounting policies retrospectively. Nevertheless, as permitted by MFRS 9, Financial Instruments, the Group and the Company elected not to restate the comparatives.

Current financial year The Group and the Company recognise loss allowances for expected credit losses on financial assets measured at amortised cost, debt investments measured at fair value through other comprehensive income, contract assets and lease receivables. Expected credit losses are a probability-weighted estimate of credit losses.

The Group and the Company measure loss allowances at an amount equal to lifetime expected credit loss, except for debt securities that are determined to have low credit risk at the reporting date, cash and bank balance and other debt securities for which credit risk has not increased significantly since initial recognition, which are measured at 12-month expected credit loss. Loss allowances for trade receivables, contract assets and lease receivables are always measured at an amount equal to lifetime expected credit loss.

184 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(o) Impairment (continued) (i) Financial assets (continued) Current financial year (continued) When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit loss, the Group and the Company consider reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information, where available.

Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of the asset, while 12-month expected credit losses are the portion of expected credit losses that result from default events that are possible within the 12 months after the reporting date. The maximum period considered when estimating expected credit losses is the maximum contractual period over which the Group and the Company are exposed to credit risk.

The Group and the Company estimate the expected credit losses on trade receivables using a provision matrix with reference to historical credit loss experience.

An impairment loss in respect of financial assets measured at amortised cost is recognised in profit or loss and the carrying amount of the asset is reduced through the use of an allowance account.

An impairment loss in respect of debt investments measured at fair value through other comprehensive income is recognised in profit or loss and the allowance account is recognised in other comprehensive income.

At each reporting date, the Group and the Company assess whether financial assets carried at amortised cost and debt securities at fair value through other comprehensive income are credit impaired. A financial asset is credit impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

The gross carrying amount of a financial asset is written off (either partially or full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group or the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s or the Company’s procedures for recovery amounts due.

Previous financial year All financial assets (except for financial assets categorised as fair value through profit or loss, investments in subsidiaries, associates and joint venture) were assessed at each reporting date whether there was any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. Losses expected as a result of future events, no matter how likely, were not recognised. For an investment in an equity instrument, a significant or prolonged decline in the fair value below its cost was an objective evidence of impairment. If any such objective evidence exists, then the impairment loss of the financial asset was estimated.

An impairment loss in respect of loans and receivables and held-to-maturity investments was recognised in profit or loss and was measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount of the asset was reduced through the use of an allowance account.

An impairment loss in respect of available-for-sale financial assets was recognised in profit or loss and was measured as the difference between the asset’s acquisition cost (net of any principal repayment and amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Where a decline in the fair value of an available-for-sale financial asset had been recognised in the other comprehensive income, the cumulative loss in other comprehensive income was reclassified from equity to profit or loss.

185 Financial Statements Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(o) Impairment (continued) (i) Financial assets (continued) Previous financial year (continued) An impairment loss in respect of unquoted equity instrument that was carried at cost was recognised in profit or loss and was measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available-for-sale was not reversed through profit or loss.

If, in a subsequent period, the fair value of a debt instrument increases and the increase could be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss was reversed, to the extent that the asset’s carrying amount did not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment was reversed. The amount of the reversal was recognised in profit or loss.

(ii) Other assets The carrying amounts of other assets (except for inventories, development properties and deferred tax assets) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each period at the same time and whenever there is an indication that they may be impaired.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units. Subject to an operating segment ceiling test, for the purpose of goodwill impairment testing, cash-generating units to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to group of cash-generating units that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.

An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit exceeds its estimated recoverable amount.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (a group of cash- generating units) and then to reduce the carrying amounts of the other assets in the cash-generating unit (groups of cash- generating units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to profit or loss in the financial year in which the reversals are recognised.

186 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

2. SIGNIFICANT ACCOUNTING POLICIES (continued) (p) Equity instruments Instruments classified as equity are measured at cost on initial recognition and are not remeasured subsequently.

(i) Issue expenses Costs directly attributable to issue of shares and share options classified as equity are recognised as a deduction from equity.

(ii) Ordinary shares Ordinary shares are classified as equity.

(iii) Distributions of non-cash assets to owners of the Company The Group measures a liability to distribute non-cash assets as a dividend to the owners of the Company at the fair value of the assets to be distributed. The carrying amount of the dividend is remeasured at each reporting period and at the settlement date, with any changes recognised directly in equity as adjustments to the amount of the distribution. On settlement of the transaction, the Group recognises the difference, if any, between the carrying amount of the assets distributed and the carrying amount of the liability in profit or loss.

(q) Perpetual securities The perpetual securities do not have a maturity date and the issuer is able to elect to defer making a distribution, subject to the terms and conditions of the securities issue. Accordingly, the perpetual securities are presented within equity as the issuer is not considered to have a contractual obligation to make principle repayments or distributions in respect of its perpetual securities. Distributions are treated as dividends which will be directly debited from retained earnings. Incremental costs directly attributable to the issuance of perpetual securities are deducted against the proceeds from the issue.

(r) Compound financial instruments A compound financial instrument is a non-derivative financial instrument that contains both a liability and an equity component.

The component parts of compound financial instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the issuer’s equity instruments is an equity instrument.

The liability component of a compound financial instrument is initially recognised at the fair value of a similar liability that does not have an equity conversion option. The equity component is initially recognised at the difference between fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured.

(s) Employee benefits (i) Short-term employee benefits Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

The Group’s contributions to defined contribution plans are charged to the profit or loss in the year to which they relate. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payment is available.

187 Financial Statements Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(s) Employee benefits (continued) (ii) Defined benefits plans The Group has non-funded defined benefits plans given to employees of certain subsidiaries within the Group.

The Group’s net obligation in respect of defined benefits retirement plan and termination plan are calculated by estimating the amount of future benefit that employees have earned in return for their services in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Group, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest), if any, and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income. The Group determines the net interest expense or income on the net defined liability or asset for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then net defined benefit liability or asset, taking into account any changes in the net defined benefit liability or asset during the period as a result of contributions and benefit payments.

Net interest expense and other expenses relating to defined benefits plans are recognised in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Group recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.

The gain or loss on settlement is the difference between the present value of the defined benefit obligation being settled as determined on the date of settlement and the settlement price, including any plan assets transferred and any payments made directly by the Group in connection with the settlement.

(iii) Share-based payments transactions The grant date fair value of share-based payments granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non- market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

The fair value of the employee share options is measured using the trinomial option pricing model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average cost of capital, earnings before interest, tax, depreciation, amortisation, exchange differences and other non-operational items (“EBITDA”) multiples, expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

(t) Provision A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

188 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

2. SIGNIFICANT ACCOUNTING POLICIES (continued) (u) Revenue and other income (i) Revenue Revenue is measured based on the consideration specified in a contract with a customer in exchange for transferring goods or services to a customer, excluding amounts collected on behalf of third parties. The Group or the Company recognises revenue when (or as) it transfers control over a product or service to customer. An asset is transferred when (or as) the customer obtains control of the asset.

The Group or the Company transfers control of a good or service at a point in time unless one of the following overtime criteria is met:

(a) the customer simultaneously receives and consumes the benefits provided as the Group or the Company performs;

(b) the Group’s or the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or

(c) the Group’s or the Company’s performance does not create an asset with an alternative use and the Group or the Company has an enforceable right to payment for performance completed to date.

(ii) Rental income Rental income receivable under operating lease is recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income over the term of the lease. Contingent rentals are recognised as income in the reporting period in which they are earned.

(iii) Dividend income Dividend income from investments is recognised in profit or loss on the date that the right to receive payment is established.

(iv) Finance income Finance income comprises interest income from bank deposits and debt securities, net fair value gain of financial derivatives that are recognised in profit or loss, net fair value gain of the CCPS liabilities, and net exchange gain from foreign currency denominated interest-bearing borrowings and lendings.

Interest income Interest income is recognised as it accrues using the effective interest method in profit or loss except for interest income arising from temporary investment of borrowings taken specifically for the purpose of obtaining a qualifying asset which is capitalised.

(v) Finance costs Finance costs comprises interest expense on borrowings, finance lease liabilities and bonds, amortisation of borrowing transaction costs and discount on bonds, bank charges, net fair value losses on financial derivatives that are recognised in profit or loss, net fair value losses of CCPS liabilities, and net exchange losses from foreign currency denominated interest-bearing borrowings and lendings.

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets.

189 Financial Statements Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(v) Finance costs (continued) The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

(w) Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous financial years.

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

Where investment properties are carried at their fair value in accordance with the accounting policy set out in Note 2(h), the amount of deferred tax recognised is measured using the tax rates that would apply on sale of those assets at their carrying value at the reporting date unless the property is depreciable and is held with the objective to consume substantially all of the economic benefits embodied in the property over time rather than through sale. In other cases, the amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are not discounted.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

A tax incentive that is not a tax base of an asset is recognised as a reduction of tax expense in profit or loss as and when it is granted and claimed. Any unutilised portion of the tax incentive is recognised as a deferred tax asset to the extent that it is probable that future taxable profits will be available against which the unutilised tax incentive can be utilised.

(x) Earnings per share Basic earnings per share (“EPS”) is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held.

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

Both basic and diluted EPS of the Group are adjusted to take into consideration the effect of perpetual securities distribution on earnings.

190 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

2. SIGNIFICANT ACCOUNTING POLICIES (continued) (y) Operating segments An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the chief operating decision maker, which in this case is the Board of Directors of the Company, to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

(z) Contingencies (i) Contingent liabilities Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is not recognised in the statements of financial position and is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(ii) Contingent assets When an inflow of economic benefit of an asset is probable where it arises from past events and where existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of entity, the asset is not recognised in the statements of financial position but is being disclosed as a contingent asset. When the inflow of economic benefit is virtually certain, then the related asset is recognised.

(aa) Fair value measurements Fair value of an asset or a liability, except for share-based payment and lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market.

For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair value are categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

The Group recognises transfers between levels of the fair value hierarchy as of the date of the event or change in circumstances that caused the transfers.

191 Financial Statements Notes to the Financial Statements

3. PROPERTY, PLANT AND EQUIPMENT Hospital and medical equipment, renovations, Laboratory furniture and and other Freehold Leasehold fittings and teaching Motor Construction- land land Buildings equipment equipment vehicles in-progress Total Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Cost At 1 January 2017 567,967 3,890,441 4,292,931 6,478,404 60,199 41,104 2,684,571 18,015,617 Acquisitions through business combinations 43 – – – 12,839 – – 861 13,700 Disposal of a subsidiary 44 – – – (548) – (161) – (709) Disposal of a business unit 42 – – – (662) – – – (662) Additions 21,532 – 83,313 919,439 10,014 5,181 578,329 1,617,808 Disposals – – – (158,766) – (6,457) – (165,223) Write off – – – (70,832) (2,212) – (915) (73,959) Reclassification 225 – 1,361,155 1,112,726 – 145 (2,474,251) – Transfer to intangible assets 6 – – – (3,901) – – – (3,901) Transfer from investment properties 5 – 22,086 5,164 3,346 – – – 30,596 Translation differences (27,365) (53,349) (168,621) (645,348) – (2,123) (160,606) (1,057,412) At 31 December 2017/ 1 January 2018 562,359 3,859,178 5,573,942 7,646,697 68,001 37,689 627,989 18,375,855 Acquisitions through business combinations 43 520,278 300,588 372,981 886,686 – 15,224 119,911 2,215,668 Additions – 10,348 16,924 407,417 6,809 4,948 738,858 1,185,304 Disposals – – (913) (87,895) – (4,626) (1,011) (94,445) Write off – – – (13,373) (6,990) (200) – (20,563) Reclassification – – 37,433 759,970 661 2,489 (800,553) – Transfer to intangible assets 6 – – – (1,569) – – (956) (2,525) Translation differences (39,880) (22,381) (103,311) (770,198) – (3,540) (88,595) (1,027,905) At 31 December 2018 1,042,757 4,147,733 5,897,056 8,827,735 68,481 51,984 595,643 20,631,389

192 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

3. PROPERTY, PLANT AND EQUIPMENT (continued) Hospital and medical equipment, renovations, Laboratory furniture and and other Freehold Leasehold fittings and teaching Motor Construction- land land Buildings equipment equipment vehicles in-progress Total Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Accumulated depreciation and impairment losses At 1 January 2017 – 331,436 743,212 3,737,395 35,695 26,550 798 4,875,086 Acquisitions through business combinations 43 – – – 7,328 – – – 7,328 Disposal of a subsidiary 44 – – – (465) – (176) – (641) Depreciation charge for the year – 45,388 118,855 738,382 6,855 4,825 – 914,305 Impairment loss made/ (reversed) – – – 2,267 – – (803) 1,464 Disposals – – – (139,619) – (5,168) – (144,787) Write off – – – (69,035) (2,050) – – (71,085) Translation differences – (5,047) (23,981) (317,581) – (832) 5 (347,436) At 31 December 2017/ 1 January 2018 – 371,777 838,086 3,958,672 40,500 25,199 – 5,234,234 Acquisitions through business combinations 43 – – 32,037 372,100 – 10,915 – 415,052 Depreciation charge for the year – 44,450 110,983 709,003 7,646 4,900 – 876,982 Impairment loss made – – – 2,184 – – 1,535 3,719 Disposals – – (43) (82,910) – (4,214) – (87,167) Write off – – – (12,705) (6,520) (119) – (19,344) Reclassification – – (4,942) 4,389 553 – – – Translation differences – (1,022) (23,867) (371,571) – (835) 8 (397,287) At 31 December 2018 – 415,205 952,254 4,579,162 42,179 35,846 1,543 6,026,189

Net carrying amount At 1 January 2017 567,967 3,559,005 3,549,719 2,741,009 24,504 14,554 2,683,773 13,140,531

At 31 December 2017/ 1 January 2018 562,359 3,487,401 4,735,856 3,688,025 27,501 12,490 627,989 13,141,621

At 31 December 2018 1,042,757 3,732,528 4,944,802 4,248,573 26,302 16,138 594,100 14,605,200

193 Financial Statements Notes to the Financial Statements

3. PROPERTY, PLANT AND EQUIPMENT (continued) Renovations, furniture and fittings and Motor equipment vehicles Total RM’000 RM’000 RM’000 Company Cost At 1 January 2017 1,440 2,763 4,203 Additions 85 365 450 Write off (31) – (31) Translation differences (1) (28) (29) At 31 December 2017/1 January 2018 1,493 3,100 4,593 Additions 17 556 573 Disposal – (650) (650) Translation differences – (7) (7) At 31 December 2018 1,510 2,999 4,509

Accumulated depreciation At 1 January 2017 582 1,477 2,059 Depreciation charge for the year 280 585 865 Write off (31) – (31) Translation differences – (22) (22) At 31 December 2017/1 January 2018 831 2,040 2,871 Depreciation charge for the year 284 575 859 Disposal – (650) (650) At 31 December 2018 1,115 1,965 3,080

Net carrying amount At 1 January 2017 858 1,286 2,144

At 31 December 2017/1 January 2018 662 1,060 1,722

At 31 December 2018 395 1,034 1,429

Leasehold land under perpetual lease At 31 December 2018, the carrying amount of leasehold land of the Group includes an amount of RM296,303,000 (2017: Nil) which is not depreciated as the land is taken on a perpetual lease.

Securities As at 31 December 2018, property, plant and equipment of the Group with carrying amounts of RM1,139,559,000 (2017: RM648,664,000) are charged to licensed financial institutions for credit facilities and term loans granted to the Group.

Assets under finance lease arrangements Included in the net carrying amount of property, plant and equipment of the Group are motor vehicles and equipment with net carrying amounts of RM427,905,000 (2017: RM106,787,000) that are held under finance lease arrangements.

Borrowing costs Included in additions of the Group during the year are capitalised borrowing costs amounting to RM24,674,000 (2017: RM68,771,000).

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3. PROPERTY, PLANT AND EQUIPMENT (continued) Prepaid lease payments amortisation capitalised Included in additions of construction-in-progress of the Group are the amortisation of prepaid lease payments amounting to RM3,764,000 (2017: RM6,906,000) (See Note 4).

4. PREPAID LEASE PAYMENTS Group 2018 2017 RM’000 RM’000 Cost At 1 January 1,130,005 1,221,328 Additions 4,075 – Translation differences 11 (91,323) At 31 December 1,134,091 1,130,005

Accumulated amortisation At 1 January 93,374 77,849 Amortisation charge for the year 21,509 22,879 Translation differences 1,398 (7,354) At 31 December 116,281 93,374

Net carrying amount At 1 January 1,036,631 1,143,479

At 31 December 1,017,810 1,036,631

Prepaid lease payments relate to leasehold land which are in substance operating leases. The prepaid lease payments are amortised on a straight-line basis over lease term ranging from 50 to 99 years. The amortisation charge for the year ended 31 December 2018 of RM3,764,000 (2017: RM6,906,000) is capitalised in property, plant and equipment which relates to the construction of a hospital.

5. INVESTMENT PROPERTIES Group 2018 2017 Note RM’000 RM’000 At 1 January 3,109,985 3,033,107 Additions 69,613 207,927 Transfer to property, plant and equipment 3 – (30,596) Change in fair value recognised in profit or loss 30 74,192 22,922 Translation differences 56,639 (123,375) At 31 December 3,310,429 3,109,985

Investment properties includes land, retail units and medical suites within hospitals, nursing homes with care services and a pharmaceutical product distributing and manufacturing facility leased or intended to be leased to external parties.

195 Financial Statements Notes to the Financial Statements

5. INVESTMENT PROPERTIES (continued) The following are recognised in profit or loss in respect of investment properties:

Group 2018 2017 RM’000 RM’000 Rental income 177,267 179,934 Direct operating expenses: –– income generating investment properties (20,427) (20,699) –– non-income generating investment properties (1,386) (1,427) 155,454 157,808

Determination of fair value Investment properties are stated at fair value based on independent professional valuations. The fair values are based on open market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction wherein the parties had each acted knowledgeably and without compulsion.

The valuers have considered valuation techniques including the direct comparison method, the direct capitalisation approach, and the discounted cash flow approach in arriving at the open market value as at the balance sheet date. The direct comparison method involves the analysis of comparable sales of similar properties and adjusting the sale prices to that reflective of the investment properties. The direct capitalisation approach capitalises an income stream into a present value using revenue multipliers or single-year capitalisation rates. The discounted cash flow approach involves the estimation and the projection of an income stream over a period and discounting the income stream with an appropriate rate of return.

Fair value hierarchy The fair value of the investment properties are categorised as follows:

Level 1 Level 2 Level 3 Level 4 Group RM’000 RM’000 RM’000 RM’000 2018 Land – – 933,737 933,737 Buildings – – 2,376,692 2,376,692 – – 3,310,429 3,310,429

2017 Land – – 833,672 833,672 Buildings – – 2,276,313 2,276,313 – – 3,109,985 3,109,985

Policy on transfer between levels The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer.

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5. INVESTMENT PROPERTIES (continued) Determination of fair value (continued) Transfer between Level 1 and 2 fair values There is no transfer between Level 1 and 2 fair values during the financial year.

The following table shows the valuation techniques used in the determination of fair values within Level 3, as well as the significant unobservable inputs used in the valuation models.

Inter-relationship between significant unobservable inputs and Valuation technique Significant unobservable inputs fair value measurement Discounted cash flow approach Risk-adjusted discount rates range from The estimated fair value would increase/ 4.70% to 7.25% (2017: 5.00% to 7.50%) (decrease) if the risk-adjusted discount rates were lower/(higher). Direct comparison approach Premium made for differences in type of The estimated fair value would increase/ development (including design, use and (decrease) if premium made for differences proximity to complementary businesses) in type of development was higher/(lower). range from 0% to 25% (2017: 0% to 25%) Direct capitalisation approach Capitalisation rates range from 4.7% to The estimated fair value would increase/ 6.8% (2017: 5.0% to 7.0%) (decrease) if the capitalisation rates were lower/(higher).

6. GOODWILL ON CONSOLIDATION AND INTANGIBLE ASSETS Total Total intangible Brand Hospital Customer Other intangible Goodwill on assets and names licences relationships intangibles* assets consolidation goodwill Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Cost At 1 January 2017 1,887,237 305,613 399,372 254,161 2,846,383 11,076,000 13,922,383 Acquisitions through business combinations 43 – 7,923 – – 7,923 15,313 23,236 Disposal of a subsidiary 44 – – – (234) (234) – (234) Additions – – – 7,505 7,505 – 7,505 Write off – – – (264) (264) – (264) Transfer from property, plant and equipment 3 – – – 3,901 3,901 – 3,901 Finalisation of purchase price allocation 43 – – – – – 33,563 33,563 Translation differences (113,098) (47,368) (36,900) (19,294) (216,660) (432,678) (649,338) At 31 December 2017/ 1 January 2018 1,774,139 266,168 362,472 245,775 2,648,554 10,692,198 13,340,752 Acquisitions through business combinations 43 – – – 144,343 144,343 1,612,732 1,757,075 Additions – – – 14,511 14,511 – 14,511 Write off – – – (222) (222) – (222) Transfer from property, plant and equipment 3 – – – 2,525 2,525 – 2,525 Translation differences (123,298) (44,049) (40,378) (34,663) (242,388) (408,388) (650,776) At 31 December 2018 1,650,841 222,119 322,094 372,269 2,567,323 11,896,542 14,463,865

* Other intangibles include capitalised development costs, brand use rights and favourable lease arrangements.

197 Financial Statements Notes to the Financial Statements

6. GOODWILL ON CONSOLIDATION AND INTANGIBLE ASSETS (continued) Total Total intangible Brand Hospital Customer Other intangible Goodwill on assets and names licences relationships intangibles* assets consolidation goodwill Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Accumulated amortisation and impairment losses At 1 January 2017 – – 250,250 106,491 356,741 – 356,741 Disposal of a subsidiary 44 – – – (17) (17) – (17) Amortisation charge for the year – – 24,745 21,593 46,338 – 46,338 Write off – – – (16) (16) – (16) Translation differences – – (20,588) (12,346) (32,934) – (32,934) At 31 December 2017/ 1 January 2018 – – 254,407 115,705 370,112 – 370,112 Acquisitions through business combinations 43 – – – 87,278 87,278 – 87,278 Amortisation charge for the year – – 19,476 21,236 40,712 – 40,712 Impairment – – – – – 66,168 66,168 Write off – – – (48) (48) – (48) Translation differences – – (25,078) (14,789) (39,867) 1,177 (38,690) At 31 December 2018 – – 248,805 209,382 458,187 67,345 525,532

Net carrying amount At 1 January 2017 1,887,237 305,613 149,122 147,670 2,489,642 11,076,000 13,565,642

At 31 December 2017/ 1 January 2018 1,774,139 266,168 108,065 130,070 2,278,442 10,692,198 12,970,640

At 31 December 2018 1,650,841 222,119 73,289 162,887 2,109,136 11,829,197 13,938,333

* Other intangibles include capitalised development costs, brand use rights and favourable lease arrangements.

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6. GOODWILL ON CONSOLIDATION AND INTANGIBLE ASSETS (continued) Goodwill, brand names and hospital licences are allocated to the Group’s operating divisions which represent the lowest level within the Group at which the goodwill, brand names and hospital licences are monitored for internal management purposes.

The aggregate carrying amounts of goodwill, brand names and hospital licences allocated to each operating unit are as follows:

Goodwill Brand names Hospital licences 2018 2017 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group Singapore healthcare services 5,796,769 5,835,854 1,145,173 1,145,173 – – Malaysia healthcare services 2,081,322 2,023,390 116,000 116,000 – – China healthcare services 185,476 184,880 – – – – India healthcare services –– Continental Group(1) – 73,151 – – – – –– Global Group(2) 607,573 659,955 – – – – –– Fortis Group(3) 1,517,088 – – – – – Turkey healthcare services 1,249,246 1,522,161 389,668 512,966 222,119 266,168 PLife REIT 151,938 152,940 – – – – Education 224,976 224,976 – – – – Others 14,809 14,891 – – – – 11,829,197 10,692,198 1,650,841 1,774,139 222,119 266,168

1 Continental Hospitals Private Limited and its subsidiaries 2 Ravindranath GE Medical Associates Private Limited and its subsidiaries 3 Fortis Healthcare Limited and its subsidiaries

Impairment testing for cash-generating units containing goodwill, brand names and hospital licences (a) Healthcare services and Education CGUs Key assumptions used in determining the recoverable amount For the purpose of impairment testing, the carrying amounts are allocated to the Group’s operating divisions which are the cash-generating units (“CGU”). Recoverable amount of each CGU, except for Fortis Group and PLife REIT, is estimated based on its value in use. The value in use calculations apply a discounted cash flow model using cash flow projections based on past experience, actual operating results, approved financial budgets for 2019 and 5 to 10 years business plans.

The key assumptions for the computation of value in use of goodwill, brand names and hospital licences include the following:

(i) Revenue growth assumptions: • Singapore healthcare services: 4% – 6% (2017: 4% – 6%) per annum for the years 2019 to 2023. • Malaysia healthcare services: 8% – 9% (2017: 6% – 12%) per annum for the years 2019 to 2023. • China healthcare services: 8% – 23% (2017: 5% – 9%) per annum for the years 2019 to 2023. • India healthcare services (Continental Group): 10% – 15% (2017: 9% – 29%) per annum for the years 2019 to 2027. • India healthcare services (Global Group): 11% – 22% (2017: 10% – 25%) per annum for the years 2019 to 2027. • Turkey healthcare services: 7% – 28% (2017: 13% – 17%) per annum for the years 2019 to 2023. • Education services: 1% to 17% (2017: -4% to 1%) per annum for the years 2019 to 2023.

199 Financial Statements Notes to the Financial Statements

6. GOODWILL ON CONSOLIDATION AND INTANGIBLE ASSETS (continued) Impairment testing for cash-generating units containing goodwill, brand names and hospital licences (continued) (a) Healthcare services and Education CGUs (continued) Key assumptions used in determining the recoverable amount (continued) (ii) EBITDA margins assumptions: • Singapore healthcare services: 25% – 27% (2017: 26%) per annum for the years 2019 to 2023. • Malaysia healthcare services: 23% – 27% (2017: 26% – 27%) per annum for the years 2019 to 2023. • China healthcare services: 13% – 27% (2017: 26% – 29%) per annum for the years 2019 to 2023. • India healthcare services (Continental Group): 4% – 25% (2017: 7% – 25%) per annum for the years 2019 to 2027. • India healthcare services (Global Group): 13% – 25% (2017: 7% – 25%) per annum for the years 2019 to 2027. • Turkey healthcare services: 18% – 21% (2017: 17% – 22%) per annum for the years 2019 to 2023. • Education services: 23% to 29% (2017: 28% – 32%) per annum for the years 2019 to 2023.

The projections are in line with the proposed expansion plans for the respective CGUs.

(iii) Terminal value was estimated using the perpetuity growth model: • Singapore healthcare services: 1% (2017: 2%) per annum. • Malaysia healthcare services: 3% (2017: 3%) per annum. • China healthcare services: 2.5% (2017: 2.5%) per annum. • India healthcare services (Continental Group): 5% (2017: 4%) per annum. • India healthcare services (Global Group): 5% (2017: 4%) per annum. • Turkey healthcare services: 5.5% (2017: 3.0%) per annum. • Education services: 0% (2017: 0%) per annum.

The terminal values were applied to steady-state estimated earnings at the end of the projected period.

(iv) Discount rates which were based on the cost of capital plus an appropriate risk premium at the date of assessment of the respective CGUs: • Singapore healthcare services: 7.5% (2017: 7.5%). • Malaysia healthcare services: 10.0% (2017: 10.5%). • China healthcare services: 9.5% (2017: 11.5%). • India healthcare services (Continental Group): 15.3% (2017: 15.0%). • India healthcare services (Global Group): 15.3% (2017: 15.0%). • Turkey healthcare services: 21% (2017: 15.5%). • Education services: 9% (2017: 9.5%).

(v) There will be no other significant changes in the government policies and regulations which will directly affect the CGUs’ businesses. The inflation for the operating expenses is in line with the estimated gross domestic product growth rate for the country based on the past trends.

The values assigned to the key assumptions represent the Group’s assessment of future trends in the healthcare and education market and are based on both external sources and internal sources (historical data).

The Group has identified that a reasonably possible change in discount rate and EBITDA margins for the years 2019 to 2023 could cause the carrying amount of the Global Group CGU to exceed the recoverable amount. An approximate 3% increase in discount rate or a 14% decrease in the EBITDA margins for the years 2019 to 2023 at the reporting date would have reduced the recoverable amount of Global Group to the carrying amount.

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Except as mentioned above, the Group believes that no reasonably foreseeable changes in the above key assumptions that would cause the carrying values of these CGUs to materially exceed their recoverable amounts other than changes in the prevailing operating environment of which the impact is not ascertainable.

(b) PLife REIT CGU Recoverable amount of PLife REIT is based on fair value less cost to sell, using the open market price of this CGU as at reporting date.

(c) Fortis Group CGU The recoverable amount of Fortis Group was based on fair value less cost to sell determined using the quoted share price of Fortis Healthcare Limited (“Fortis”) at the reporting date, adjusted for control premium. The fair value measurement is classified as Level 3 of the fair value hierarchy. A 3% decrease in share price or 4% decrease in control premium at the reporting date would have reduced the recoverable amount to its carrying amount.

7. INVESTMENT IN SUBSIDIARIES Company 2018 2017 RM’000 RM’000 At cost: Unquoted shares in Malaysia 18,582,534 15,650,619 Unquoted shares outside Malaysia 31 31 18,582,565 15,650,650 Allowance for impairment loss (2,295,921) – 16,286,644 15,650,650

The movements of cost of investment in subsidiaries are as follows:

Company 2018 2017 RM’000 RM’000 At 1 January 15,650,650 16,402,113 Subscription of new ordinary shares of a subsidiary 2,931,915 – Redemption of redeemable preference shares by subsidiary – (260,000) Return of capital by subsidiaries – (490,535) Write off investment against provision – (928) At 31 December 18,582,565 15,650,650

During the year, the Company continues to face challenges in its investment in Turkey, in particular the continuing depreciation of Turkish Lira currency over the years. The Company performed an assessment on the recoverable amount of its Turkey investment as the greater of value in use or fair value less cost to sell and determined the recoverable amount is lower than the Company’s RM5.5 billion (2017: RM2.6 billion) cost of investment in the subsidiary that holds the Turkey investment. Accordingly, an impairment loss of RM2,295,921,000 has been recognised in the Company’s profit or loss.

201 Financial Statements Notes to the Financial Statements

7. INVESTMENT IN SUBSIDIARIES (continued) Details of the investment in subsidiaries are as disclosed in Note 46.

Although the Group owns less than half of the ownership interest in the following entities, the Group consolidated them as subsidiaries in accordance with the MFRS 10, Consolidated Financial Statements, on the following basis:

a) PLife REIT The Group has de facto control over PLife REIT, on the basis that the remaining voting rights in PLife REIT are widely dispersed and that there is no indication that all other shareholders exercise their votes collectively.

b) Gleneagles JPMC Sdn. Bhd. (“GJPMC”) The Group controls the Board of GJPMC by virtual of agreement with other shareholders of GJPMC.

c) Fortis The Group controls majority of Fortis Board by virtue of the share subscription agreement with Fortis.

The Group, via PLife REIT, does not hold any ownership interest in the special purpose entities (“SPEs”) listed in Note 46. Notwithstanding that the Group does not have any direct or indirect shareholdings in these SPEs, the Group has accounted for these SPEs as subsidiaries in accordance to MFRS 10, Consolidated Financial Statements, as the Group receives substantially all of the returns related to the SPEs’ operations and net assets and has the current ability to direct these SPEs’ activities that most significantly affect their returns based on the terms of agreements under which these SPEs were established.

Non-controlling interests in subsidiaries The Group’s subsidiaries that have material non-controlling interests (“NCI”) are as follows:

Material NCI Other individually immaterial PLife REIT(i) Fortis Group GHK(iii) subsidiaries Total 2018 RM’000 RM’000 RM’000 RM’000 RM’000 NCI percentage of ownership interest and voting interest 64.34% 68.90% 40.00% Carrying amount of NCI 1,288,323 1,850,747(ii) (405,521) 1,621,592 4,355,141 Profit/(Loss) allocated to NCI 166,008 5,493* (168,266) (141,062)(ix) (137,827)

Summarised financial information before intra-group elimination As at 31 December Non-current assets 4,511,716 4,204,138 2,535,330 Current assets 75,247 2,734,102 91,317 Non-current liabilities (2,389,776) (782,438) (3,430,505) Current liabilities (41,182) (1,569,441) (209,945) Net assets/(liabilities) 2,156,005 4,586,361(vii) (1,013,803)

Year ended 31 December Revenue 335,699 217,111* 290,172 Profit/(Loss) for the year/period 239,761 10,739*(viii) (420,666) Total comprehensive income/(expenses) 232,521 (30,569)* (438,255)

Cash flows from/(used in) operating activities 263,928 12,562 (176,842) Cash flows (used in)/from investing activities (82,975) 34,381 (22,847) Cash flows (used in)/from financing activities (193,305) (174,471) 138,037 Net decrease in cash and cash equivalents (12,352) (127,528) (61,652)

Dividends paid to NCI 183,131 – –

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7. INVESTMENT IN SUBSIDIARIES (continued) Non-controlling interests in subsidiaries (continued) Material NCI Other individually immaterial PLife REIT ASYH PCH(v) ACC(vi) subsidiaries Total 2017 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 NCI percentage of ownership interest and voting interest 64.31% 40.00% 29.90% 44.47% Carrying amount of NCI 1,293,916 (213,531)(iv) 448,322 205,502 117,695 1,851,904 Profit/(Loss) allocated to NCI 142,847 (66,712) 1,424 (3,554) (214,130) (140,125)

Summarised financial information before intra-group elimination As at 31 December Non-current assets 4,368,218 4,820,797 448,994 596,568 Current assets 85,898 835,164 947,612 117,574 Non-current liabilities (242,023) (1,491,377) (6,924) (151,670) Current liabilities (2,046,305) (2,610,922) (187,780) (103,025) Net assets 2,165,788 1,553,662 1,201,902 459,447

Year ended 31 December Revenue 342,317 3,853,527 222,491 492,503 Profit/(Loss) for the year 210,096 (161,399) 17,490 (10,539) Total comprehensive income/(expenses) 225,792 (65,921) 12,991 84,614

Cash flows from/(used in) operating activities 252,095 609,506 176,042 (29,171) Cash flows used in investing activities (221,198) (582,228) (30,617) (51,850) Cash flows (used in)/from financing activities (165,083) (18,392) 590,450 30,849 Net (decrease)/increase in cash and cash equivalents (134,186) 8,886 735,875 (50,172)

Dividends paid to NCI 158,275 8,755 – –

* Relates only to the Group’s share of post-acquisition results. i Parkway Life Real Estate Investment Trust (“PLife REIT”). ii Does not include the NCI of the non-wholly owned subsidiaries of Fortis. iii GHK Hospital Limited (“GHK”). iv Does not include the NCI of the non-wholly owned subsidiaries of ASYH. v PCH Holding Pte. Ltd. (“PCH”). vi Acibadem City Clinic B.V. (“ACC”). vii Includes net assets of RM774,265,000 attributable to NCIs within Fortis Group which are individually immaterial. viii Includes total profit of RM2,767,000 attributable to NCIs within Fortis Group which are individually immaterial. ix Included is an amount of RM142,809,000 losses, representing share of profit or loss for the period from January 2018 to November 2018 pertaining to the NCIs’ 40% equity interest in ASYH. On 1 December 2018, NCI’s equity interest has decreased to approximately 10%. Refer to Note 45(f) for details.

203 Financial Statements Notes to the Financial Statements

7. INVESTMENT IN SUBSIDIARIES (continued) Significant restrictions PLife REIT The Group does not have significant restrictions on its ability to access or use the assets and settle the liabilities of PLife REIT other than those resulting from the regulatory framework within which the subsidiary operates. PLife REIT is regulated by the Monetary Authority of Singapore (“MAS”) and is supervised by the Singapore Exchange Securities Trading Limited (“SGX-ST”) for compliance with the Singapore Listing Rules. Under the regulatory framework, transactions with PLife REIT are either subject to review by PLife REIT’s Trustee or must be approved by a majority of votes by the remaining holders of Units in PLife REIT (“Unitholders”) at a meeting of Unitholders.

The assets of PLife REIT are held in trust by a Trustee for the Unitholders. As at 31 December 2018, the carrying amounts of PLife REIT’s assets and liabilities are RM4,586,963,000 (2017: RM4,454,116,000) and RM2,430,958,000 (2017: RM2,288,328,000) respectively.

8. INTERESTS IN ASSOCIATES Group 2018 2017 RM’000 RM’000 At cost: Unquoted shares 2,236 2,247 Quoted shares 464,345 – Share of post-acquisition reserves (30,825) 6,198 435,756 8,445

Investment in non-convertible debentures 274,280 –

710,036 8,445

Market value of quoted shares 620,177 –

Details of the associates are disclosed in Note 47.

The non-convertible debentures (“NCDs”) are issued by International Hospitals Limited (“IHL”), a wholly owned subsidiary of RHT Health Trust, an associate. The NCDs carry an interest of 9% per annum and mature in 10 years from the date of issuance. Subsequent to year-end, IHL is acquired as disclosed in Note 51.

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8. INTERESTS IN ASSOCIATES (continued) The Group does not have any material associates. Summarised financial information of the associates are presented in aggregate representing the Group’s share, based on their respective financial statements prepared in accordance with MFRS, modified for fair value adjustments on acquisition and differences in the Group’s accounting policies, if any:

Individually immaterial associates 2018 2017 RM’000 RM’000 Share of profit from continuing operations 11,515 1,543 Share of other comprehensive income 4,009 – Share of total comprehensive income 15,524 1,543

9. INTERESTS IN JOINT VENTURES Group 2018 2017 RM’000 RM’000 At cost: Unquoted shares 281,880 276,887 Share of post-acquisition reserves (57,129) (56,715) Allowance for impairment loss (129,019) (100,764) 95,732 119,408 Amount due from a joint venture 19,602 19,710 115,334 139,118

Details of the joint ventures are disclosed in Note 48.

Amount due from a joint venture The amount due from a joint venture is unsecured and interest-free. The repayment of the amount is at the discretion of the lender and is not expected to be repaid within the next 12 months from 31 December 2018.

The Group does not have any material joint ventures. Summarised financial information of the joint ventures are presented in aggregate representing the Group’s share, based on their respective financial statements prepared in accordance with MFRS, modified for fair value adjustments on acquisition and differences in the Group’s accounting policies, if any:

Individually immaterial joint ventures 2018 2017 RM’000 RM’000 Share of profit from continuing operations, representing share of total comprehensive income 1,897 577

In 2016, the construction of Khubchandani Hospitals Private Limited (“KHPL”)’s greenfield hospital in Mumbai stalled as a result of failed negotiations over disagreements with the joint venture partner. The disagreement persisted in 2018, resulting in further delays in the construction of the hospital. Accordingly, the Group fully impaired its investment in KHPL with the recognition of an impairment loss of RM33,353,000 (2017: Nil) during the year in the Group’s other operating expenses. As at the reporting date, the accumulated impairment loss recognised for KHPL was RM126,018,000 (2017: RM97,676,000).

205 Financial Statements Notes to the Financial Statements

10. OTHER FINANCIAL ASSETS Group Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Non-current Unquoted shares at fair value through other comprehensive income 11,334 – – – Available-for-sale unquoted shares – 11,385 – – Investments at amortised cost –– Fixed deposits with tenor of more than 3 months 7,003 – – – Loans and receivables –– Fixed deposits with tenor of more than 3 months – 3,323 – – Others –– Club membership 331 344 – – 18,668 15,052 – –

Current Fair value through profit and loss –– Mutual funds 4,257 – – – –– Money market funds 179,646 – 179,646 – Investments at amortised cost –– Fixed deposits with tenor of more than 3 months 163,282 – – – Loans and receivables –– Fixed deposits with tenor of more than 3 months – 160,235 – – 347,185 160,235 179,646 –

Equity investments designated at fair value through other comprehensive income At 1 January 2018, the Group designated the investments in unquoted equity securities as at fair value through other comprehensive income because these equity securities represents investments that the Group intends to hold for long term strategic purposes. In 2017, these investments were designated as available-for-sale.

Group Fair value Dividend as at income 31 December recognised 2018 during 2018 RM’000 RM’000 FWD Singapore Pte Ltd (formerly known as Shenton Insurance Pte Ltd) 11,334 –

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11. DEFERRED TAX ASSETS AND LIABILITIES Unutilised tax losses and unabsorbed Investment Property, capital tax Receivables/ plant and Investment Intangible allowance allowances provisions equipment properties assets Others Total Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2017 21,049 48,540 60,689 (435,176) (64,163) (458,673) 1,065 (826,669) Acquired through business combinations 43 – – – 2 – – – 2 Disposal of a subsidiary 44 – – (69) 117 – 3 – 51 Recognised in profit or loss 33 2,205 (42,348) 8,552 41,409 (12,498) 11,171 2,610 11,101 Recognised in other comprehensive income 31 – – 3,321 – – – – 3,321 Translation differences (3,465) 2 (8,373) 4,311 4,316 33,786 252 30,829 At 31 December 2017/ 1 January 2018 19,789 6,194 64,120 (389,337) (72,345) (413,713) 3,927 (781,365) Acquired through business combinations 43 225,569 5,277 195,336 (189,018) – (83,651) 10,888 164,401 Recognised in profit or loss 33 57,503 (2,808) 2,684 20,395 (14,620) 8,316 (88) 71,382 Recognised in other comprehensive income 31 – – 3,667 – – – – 3,667 Translation differences (14,002) (48) (12,070) 4,022 (3,224) 40,094 (232) 14,540 At 31 December 2018 288,859 8,615 253,737 (553,938) (90,189) (448,954) 14,495 (527,375)

The amounts determined after appropriate offsetting is included in the statements of financial position are as follows:

Assets Liabilities Net 2018 2017 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Unutilised tax losses and unabsorbed capital allowance 288,859 19,789 – – 288,859 19,789 Investment tax allowances 8,615 6,194 – – 8,615 6,194 Receivables/provisions 254,556 93,678 (819) (29,558) 253,737 64,120 Property, plant and equipment 26,984 115,423 (580,922) (504,760) (553,938) (389,337) Investment properties – – (90,189) (72,345) (90,189) (72,345) Intangible assets 1,771 5,012 (450,725) (418,725) (448,954) (413,713) Others 15,407 5,297 (912) (1,370) 14,495 3,927 596,192 245,393 (1,123,567) (1,026,758) (527,375) (781,365) Set off (132,294) (15,538) 132,294 15,538 – – 463,898 229,855 (991,273) (1,011,220) (527,375) (781,365)

Deferred tax assets and liabilities are offset where there is legally enforceable right to set off current tax assets against current tax liabilities and where the deferred taxes relate to the same taxation authority.

207 Financial Statements Notes to the Financial Statements

11. DEFERRED TAX ASSETS AND LIABILITIES (continued) Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items:

Group 2018 2017 RM’000 RM’000 Deductible temporary difference 336,060 712 Unutilised tax losses 1,654,831 551,508 1,990,891 552,220

Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the respective subsidiaries can utilise the benefits there from. Tax losses are subject to agreement by the tax authorities and compliance with tax regulations in the countries in which the subsidiaries operate.

The unutilised tax losses carried forward do not expire under current tax legislations, except for amount of RM386,157,000 (2017: RM178,649,000) which will expire in 2019 –2026.

12. DEVELOPMENT PROPERTIES Group 2018 2017 RM’000 RM’000 At 1 January 75,027 28,987 Additions 5,702 46,040 As at 31 December 80,729 75,027

13. INVENTORIES Group 2018 2017 RM’000 RM’000 Pharmaceuticals, surgical and medical supplies 350,729 281,914

As at 31 December 2018, inventories with carrying amount of RM46,920,000 (2017: RM12,892,000) are pledged to licensed financial institutions as securities for credit facilities granted to subsidiaries in India.

208 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

14. TRADE AND OTHER RECEIVABLES Group Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Non-current Trade receivables 768 1,009 – – Other receivables 17,823 1,811 – – Interest receivables 38,885 – – – Deposits 20,062 22,308 – – 77,538 25,128 – – Prepayments 34,882 40,334 – 12,229 112,420 65,462 – 12,229

Current Trade receivables 1,670,330 1,260,097 – – Trade amounts due from associates 8,203 28 – – Trade amounts due from joint ventures 20,474 14,029 – – Other receivables 83,930 78,705 35 259 Non-trade amounts due from associates 14,542 12 – – Non-trade amounts due from joint ventures 1,350 1,223 – – Interest receivables 17,485 13,812 2,823 2,002 Deposits 55,396 36,492 5 5 1,871,710 1,404,398 2,863 2,266 Prepayments 88,260 100,484 12,467 12,775 1,959,970 1,504,882 15,330 15,041

Offsetting of financial assets and financial liabilities Financial assets and liabilities that have been set off for presentation purpose are as follows:

Net carrying amount in the Balances statements Gross that are of financial amount set off position Group Note RM’000 RM’000 RM’000 2018 Trade receivables 1,796,145 (96,370) 1,699,775 Trade payables 25 (1,528,147) 96,370 (1,431,777)

2017 Trade receivables 1,365,744 (90,581) 1,275,163 Trade payables 25 (1,096,308) 90,581 (1,005,727)

Certain trade receivables and trade payables were set off for presentation purpose as the Group has enforceable rights to set off the amounts and intends either to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

209 Financial Statements Notes to the Financial Statements

15. AMOUNTS DUE FROM/(TO) SUBSIDIARIES Amounts due from subsidiaries included a dividend receivable amount of RM2,523,565,000 (2017: Nil). This dividend receivable was settled after year end by the Company’s subscription of new ordinary shares of the subsidiary.

Amounts due to subsidiaries included RM77,023,000 (2017: Nil) which is unsecured, repayable on demand and bears an interest rate of 3.50% per annum.

The remaining amounts due from/(to) subsidiaries are unsecured, interest-free and are repayable on demand.

16. CASH AND CASH EQUIVALENTS Group Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Cash and bank balances 4,166,127 4,886,821 1,227,914 1,288,920 Fixed deposits with tenor of 3 months or less 3,597,271 1,191,782 52,388 275,973 7,763,398 6,078,603 1,280,302 1,564,893

Secured bank overdrafts (81,215) (68) – – Deposits placed in escrow account (1,970,800) – – – Cash collateral received (820) (789) – – Cash and cash equivalents in statements of cash flows 5,710,563 6,077,746 1,280,302 1,564,893

Deposits placed in escrow account These are the amounts deposited in accordance with the requirements of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations (“SEBI (SAST) Regulations”) relating to the Group’s Mandatory Open Offer (“Offer”) to acquire up to an additional 26% equity interest in Fortis and Fortis Malar Hospitals Limited (see Note 40). These amounts can only be released in the manner prescribed in clause 17(10) of the SEBI (SAST) Regulations.

17. ASSETS CLASSIFIED AS HELD FOR SALE Assets classified as held for sale as at 31 December 2018 and 31 December 2017 relates to a piece of freehold land in India that is committed for sale.

210 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

18. SHARE CAPITAL Group and Company Number of Number of shares Amount shares Amount 2018 2018 2017 2017 ’000 RM’000 ’000 RM’000 Issued and fully paid: Ordinary shares At 1 January 8,239,583 16,462,994 8,231,700 8,231,700 Issued pursuant to the surrender of vested LTIP units 4,994 30,930 7,290 41,483 Issued pursuant to the exercise of vested EOS options 226 1,747 593 4,430 New shares issued (Note 45(f)) 524,493 2,931,915 – – 8,769,296 19,427,586 8,239,583 8,277,613 Transfer from share premium in accordance with Section 618(2) of the Companies Act 2016(i) – – – 8,185,381 At 31 December 8,769,296 19,427,586 8,239,583 16,462,994

The new ordinary shares issued during the financial year rank pari passu in all respects with the existing ordinary shares of the Company.

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at general meetings of the Company.

i In accordance with Section 618(2) of the Companies Act 2016, any amount standing to the credit of the share premium account has become part of the Company’s share capital. The Company has twenty-four months after the commencement of Section 74 of the Companies Act 2016 on 31 January 2017 to utilise the credit.

19. OTHER RESERVES The movements in each category of the other reserves are disclosed in the consolidated statements of changes in equity.

The nature and purpose of each category of reserves are as follows:

(a) Share option reserve Share option reserve comprises the cumulative value of employee services received for the issue of share options and conditional award of performance shares. Upon the commencement of Companies Act 2016 on 31 January 2017, when the options are exercised, the amount from the share option reserves is transferred to share capital. Before the commencement of the Companies Act 2016 on 31 January 2017, the amount from the share option reserves is transferred to share capital and the excess value above the par value of the ordinary shares issued is transferred to share premium.

When the share options expire, the amount from the share option reserve is transferred to retained earnings. Details of the share options are disclosed in Note 22.

(b) Fair value reserve Fair value reserve comprises the cumulative net change in the fair value of financial instruments designated at fair value through other comprehensive income (2017: available-for-sale financial instruments) until the investments are derecognised or impaired.

(c) Revaluation reserve The revaluation reserve relates to the revaluation of property, plant and equipment immediately prior to its reclassification as investment property.

(d) Hedge reserve Hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedges relating to hedged transactions that have not yet occurred.

211 Financial Statements Notes to the Financial Statements

19. OTHER RESERVES (continued) (e) Capital reserve The capital reserve comprises:

(i) non-cash contribution from/distribution to holding companies within the Group for the common control transfer of subsidiaries;

(ii) difference between the consideration paid/received and net assets acquired/disposed in equity transactions with non-controlling interests;

(iii) capital gain/loss arising from the payment of a non-controlling interest’s subscriptions to the share capital of subsidiaries or arising from the Group’s subscription of additional shares of non-wholly owned subsidiaries; and

(iv) financial liabilities arising from initial issue of put options to non-controlling interests for sale of interests in subsidiaries to the Group, and its subsequent remeasurement.

(f) Legal reserve The legal reserve comprises:

(i) first and second legal reserves for the Group’s subsidiaries in Turkey. The first legal reserves are generated by annual appropriations amounting to 5 percent of income disclosed in the Group’s Turkish-based subsidiaries’ statutory accounts until it reaches 20 percent of the paid-up share capital of these subsidiaries. If the dividend distribution is made in accordance with statutory records, a further 1/11 of dividend distribution, in excess of 5 percent of paid-up share capital are to be appropriated to increase the second legal reserve; and

(ii) statutory reserve fund (“SRF”) for the Group’s subsidiaries in the People’s Republic of China (“PRC”) who are required by the Foreign Enterprise Law to allocate 10% of the statutory profits after tax as determined in accordance with the applicable PRC accounting standards and regulations to the SRF annually. Subject to approval from the relevant PRC authorities, the SRF may be used to offset any accumulated losses or increase the registered capital of the subsidiaries. The SRF is not available for dividend distribution to shareholders.

(g) Foreign currency translation reserve The foreign currency translation reserve of the Group comprises:

(i) foreign exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from the functional currency of the Company;

(ii) the exchange differences on monetary items which form part of the Group’s net investment in the foreign operations, provided certain conditions are met; and

(iii) the effective portion of any foreign currency differences arising from hedges of the Group’s net investment in a foreign operation.

212 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

20. PERPETUAL SECURITIES In July 2017, a wholly owned subsidiary, Parkway Pantai Limited (“PPL”) established a US$2.0 billion Multicurrency Term Note Programme (“MTN programme”).

In the same month, senior perpetual securities (“perpetual securities”) with an aggregate principal amount of US$500.0 million (approximately RM2,130.8 million) were issued by PPL under the MTN programme. The perpetual securities bear an initial semi- annual distribution of 4.25% per annum which will be reset in July 2022 and at every 5 years thereafter.

The salient features of the perpetual securities are as follows:

i) unrated and listed on the Singapore Stock Exchange;

ii) direct, unconditional, unsubordinated and unsecured obligations of PPL;

iii) no fixed redemption date but PPL has the option to redeem at the end of 5 years from date of issuance at their principal amounts and on each subsequent semi-annual periodic distribution payment date;

iv) may also be redeemed at the option of PPL upon the occurrence of certain events as per detailed in the terms and conditions of offering circular and pricing supplement of the perpetual securities;

v) expected periodic distribution amount may be deferred by PPL and are cumulative, subject to the terms and conditions in the offering circular of the perpetual securities; and

vi) shall at all times rank pari passu and without any preference among the perpetual securities issued and (save for certain obligations required to be preferred by law) equally with all other unsecured obligations (other than subordinated obligations, if any) of PPL, from time to time outstanding.

The issued perpetual securities are classified as equity because the payment of cumulative distribution or redemption of the securities are at the option of PPL.

During the financial year, distributions amounting to RM85,846,000 (2017: RM38,639,000) were accrued to perpetual security holders, and RM87,416,000 (2017: Nil) distributions were paid to the perpetual security holders.

As at 31 December 2018, an amount of US$3,000,000, approximately RM12,497,000 (2017: US$3,000,000, approximately RM12,351,000) perpetual securities was held by a Director of the Company.

213 Financial Statements Notes to the Financial Statements

21. LOANS AND BORROWINGS Group 2018 2017 RM’000 RM’000 Non-current Secured Bank borrowings 922,495 437,702 Loans from corporates 7,350 – Finance lease liabilities 147,326 107,492 Unsecured Bank borrowings 6,705,248 5,257,584 Fixed rate medium term notes 444,537 301,007 Debt component of compulsory convertible debentures (“CCDs”) 247,657 – Loans from corporates 626 – Loans from non-controlling interests (“NCI”) 855,703 844,268 9,330,942 6,948,053 Current Secured Bank borrowings 324,672 36,412 Loans from corporates 1,709 – Finance lease liabilities 35,912 31,299 Unsecured Bank borrowings 760,168 622,276 Loans from corporates 647 – 1,123,108 689,987 Total loans and borrowings 10,454,050 7,638,040

The terms and conditions of the bank borrowings are as follows:

Currency Nominal interest rate Year of maturity Carrying amount Group % RM’000 2018 Secured bank loans EUR 4.50% 2020 3,902 Secured bank loans EUR Euribor(1) + 1.5% 2021 – 2024 381,302 Secured bank loans INR MCLR(2) + 0.4% to 2.45% 2019 – 2027 774,789 Secured bank loans INR Base rate + 1.25% to 1.70% 2019 – 2028 61,066 Secured bank loans MKD 4.50% 2019 4,367 Secured bank loans SGD 2.88% 2019 19,811 Secured bank loans USD LIBOR(3) + 1.75% 2019 1,930 Secured loans from corporates INR 7.78% – 9.75% 2019 – 2024 9,059 Unsecured bank loans EUR 2.10% to 3.80% 2019 – 2021 61,613 Unsecured bank loans EUR Euribor + 0.38% to 3.10% 2020 – 2028 1,648,826 Unsecured bank loans HKD HIBOR(4) + 0.8% 2021 1,293,372 Unsecured bank loans JPY LIBOR + 0.3% to 1.05% 2019 – 2024 1,037,456 Unsecured bank loans SGD SOR(5) + 0.45% to 1.00% 2019 – 2021 1,259,187 Unsecured bank loans SGD SWAP rate + 0.92% 2021 1,551,003 Unsecured bank loans TL 0% – 27% 2019 91,474 Unsecured bank loans USD LIBOR + 1.55% + 3.10% 2020 – 2021 522,485 Unsecured CCDs INR 17.5% 2030 247,657 Unsecured fixed rate medium term notes –– Issued in 2016 JPY 0.58% 2022 124,329 –– Issued in 2017 JPY 0.57% 2023 188,349 –– Issued in 2018 JPY 0.65% 2024 131,859 Unsecured loans from NCI HKD HIBOR + 1.30% 2021 853,268 Unsecured loans from NCI RMB PBC interest rate(6) 2020 – 2025 2,435 Unsecured loans from corporates AED 0.00% 2021 626 Unsecured loans from corporates USD 0.00% 2019 647 10,270,812 214 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

21. LOANS AND BORROWINGS (continued) The terms and conditions of the bank borrowings are as follows: (continued)

Currency Nominal interest rate Year of maturity Carrying amount Group % RM’000 2017 Secured bank loans BGN SOFIBOR(7) + 1.00% 2018 6,362 Secured bank loans EUR 4.50% to 5.25% 2018 – 2020 9,441 Secured bank loans EUR Euribor + 1.50% 2018 – 2020 112,756 Secured bank loans INR Base rate + 1.25% to 1.70% 2018 – 2028 341,439 Secured bank loans USD LIBOR + 1.75% 2019 4,117 Unsecured bank loans EUR Euribor + 0.38% to 3.10% 2018 – 2026 1,877,875 Unsecured bank loans EUR 2.10% to 3.90% 2018 – 2021 71,051 Unsecured bank loans HKD HIBOR + 0.80% 2021 1,050,721 Unsecured bank loans JPY LIBOR + 0.30% to 1.05% 2019 – 2021 1,079,924 Unsecured bank loans MKD 5.25% 2018 4,848 Unsecured bank loans SGD SOR + 0.73% to 1.05% 2019 – 2021 1,201,112 Unsecured bank loans SGD COF(8) 2018 48,609 Unsecured bank loans TL 0% – 15.50% 2018 58,812 Unsecured bank loans USD LIBOR + 2.95% to 3.10% 2018 – 2020 486,905 Unsecured fixed rate medium term notes –– Issued in 2016 JPY 0.58% 2022 119,642 –– Issued in 2017 JPY 0.57% 2023 181,367 Unsecured loan from NCI HKD HIBOR + 1.30% 2021 844,268 7,499,249

1 Euro Interbank Offer Rate 2 Marginal Cost of Funds Based Lending Rate 3 London Interbank Offered Rate 4 Hong Kong Interbank Offered Rate 5 Singapore Swap Offer Rate 6 People’s Bank of China benchmark loan interest rate 7 Sofia Interbank Bid Rate 8 Bank’s cost of funds

215 Financial Statements Notes to the Financial Statements

21. LOANS AND BORROWINGS (continued) The secured Indian Rupee (“INR”) denominated bank loans are secured over the assets and shares of certain subsidiaries and associates.

The secured INR denominated loans from corporates are secured over specific equipments of certain subsidiaries.

The Singapore Dollar (“SGD”) denominated bank loans are secured over the units in an associate held by the Group.

The secured United States Dollar (“USD”), Macedonian Denar (“MKD”) and Euro Dollars (“Euro”) denominated bank borrowings are secured over assets of certain subsidiaries in Turkey.

The secured Bulgarian Lev (“BGN”) denominated bank borrowings are secured over assets of certain subsidiaries in Bulgaria. The loan was fully repaid in 2018.

Breach of loan covenant One of the subsidiaries, Continental breached its loan covenant in respect of a bank loan with a carrying amount of RM95,470,000. Several non-financial covenants, including the requirement for the loan to be secured with a pledge of 51% shares in Continental, was not in place as at 31 December 2018. Consequently, the bank loan became repayable on demand and was classified in full as a current liability. The breach was not remedied when these financial statements were authorised for issue.

Unsecured fixed rate medium term notes PLife REIT has through its wholly owned subsidiary, Parkway Life MTN Pte Ltd (“PLife MTN”), has put in place a SGD500 million Multicurrency Debt Issuance Programme, to provide PLife REIT with the flexibility to tap various types of capital market products including issuance of perpetual securities when needed.

Under the Debt Issuance Programme, PLife MTN is able to issue notes while HSBC Institutional Trust Services (Singapore) Limited (in its capacity as trustee of PLife REIT) (“PLife REIT Trustee”) is able to issue perpetual securities.

All sums payable in respect of the notes issued by PLife MTN are unconditionally and irrevocably guaranteed by PLife REIT Trustee.

As at 31 December 2018, there are three series of outstanding fixed rate notes issued under the Multicurrency Debt Issuance Programme amounting to JPY11.8 billion (approximately RM444.5 million) with maturity dates between 2022 to 2024 (2017: JPY8.3 billion (approximately RM301.0 million) with maturity dates in 2022 to 2023).

Debt component of compulsorily convertible debentures (“CCDs”) The compulsorily convertible debentures (“CCDs”) are issued by Fortis Hospotel Limited (“FHTL”), an indirect subsidiary of the Group. The CCDs carry an interest of 17.5% per annum and are convertible into 131,026,000 shares of FHTL at a price of INR32.55 (equivalent RM1.91) per share. Subject to relevant regulatory and third party approvals, the CCD holder has the right to convert the CCDs, at any time on or prior to the maturity date in 2030. The CCDs are compulsorily convertible into shares on the maturity date.

Loans from non-controlling interests The HKD-denominated loans from a non-controlling interest are in relation to the non-controlling interest’s share of the financing granted to a subsidiary, GHK Hospital Limited (“GHK”), for the purchase of land and construction of a hospital in Hong Kong.

216 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

21. LOANS AND BORROWINGS (continued) Finance lease liabilities Payments Interest Payments Interest Net 2018 2018 2018 2017 2017 2017 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Less than 1 year 44,756 (8,844) 35,912 37,603 (6,304) 31,299 Between 1 and 5 years 133,196 (28,060) 105,136 122,352 (15,254) 107,098 More than 5 years 120,594 (78,404) 42,190 403 (9) 394 298,546 (115,308) 183,238 160,358 (21,567) 138,791

The Group has finance lease contracts for various items of property, plant and equipment. There are no restrictions placed upon the Group by entering into these leases and no arrangements have been entered into for contingent rental payments.

Reconciliation of movements of liabilities to cash flows arising from financing activities Fixed rate Debt Finance Other medium Loan component lease loans and Interest term notes from NCI of CCDs liabilities borrowings payable Total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

As at 1 January 2017 126,879 920,535 – 149,912 7,198,959 11,379 8,407,664 Net changes from financing cash flows 185,139 (20,621) – (58,455) (585,176) (305,329) (784,442) New finance leases – – – 53,424 – – 53,424 Acquisition of a subsidiary – – – 3,358 2,985 – 6,343 Disposal of a subsidiary – – – – (27) – (27) Foreign exchange movements (11,011) (76,267) – (9,448) (295,958) (1,388) (394,072) Other liability related changes – 20,621 – – 33,191 331,420 385,232 As at 31 December 2017/ 1 January 2018 301,007 844,268 – 138,791 6,353,974 36,082 7,674,122

Net changes from financing cash flows 128,542 2,454 – (38,319) 1,722,210 (363,147) 1,451,740 New finance leases – – – 58,654 – – 58,654 Acquisition of subsidiaries – – 252,014 29,284 753,592 12,772 1,047,662 Foreign exchange movements 14,988 8,981 (3,677) (5,172) (69,188) (1,222) (55,290) Other liability related changes – – (680) – (37,673) 358,152 319,799 As at 31 December 2018 444,537 855,703 247,657 183,238 8,722,915 42,637 10,496,687 Note 25

217 Financial Statements Notes to the Financial Statements

22. EMPLOYEE BENEFITS Group Company 2018 2017 2018 2017 Note RM’000 RM’000 RM’000 RM’000 Non-current Cash-settled LTIP – 49 – 49 Retirement benefits 23 69,322 27,887 – – Employment termination benefits 24 15,958 15,353 – – Provision for unconsumed leave 2,347 2,301 – – Deferred bonus scheme 11,311 6,852 122 – 98,938 52,442 122 49

Current Cash-settled LTIP 111 184 111 184 Retirement benefits 23 7,055 1,540 – – Employment termination benefits 24 925 846 – – PTM long term incentive plan (cash-settled) 1,119 1,287 – – Defined contribution plan 36,172 35,810 200 49 Provision for unconsumed leave 69,683 44,287 1,047 564 Deferred bonus scheme 15,482 10,079 245 – 130,547 94,033 1,603 797

Cash-settled LTIP The LTIP of the Company was approved and adopted by its Board on 25 March 2011 with the aim to make total employee remuneration sufficiently competitive to recruit, reward, retain and motivate outstanding employees.

Cash-settled LTIP balances refers to the amount that the Group has to pay out in the next few years to eligible personnel who are offered LTIP units but have elected to opt out of the scheme and receive cash instead of share options.

During the year, no (2017: 58,000) cash-settled LTIP units were granted to eligible employees.

PTM long term incentive plan (cash-settled) In 2009, the long term incentive (“LTI”) plan of a subsidiary, Parkway Trust Management Limited (“PTM”), was approved to award eligible employees with units in PLife REIT held by PTM when certain prescribed performance targets are met. The LTI plan is administered by the remuneration committee of PTM.

Provision for unconsumed leave The balances represent the cash value amount of the unconsumed leave balance entitled to the employees at the end of the financial year. Employees of certain subsidiaries can carry-forward a portion of the unconsumed leave and utilise it in future service periods or receive cash compensation on termination of employment. Unconsumed leave that does not fall due wholly within twelve months after the end of the period in which the employees render the related service and are not expected to be utilised wholly within twelve months after the end of such period is classified as non-current. The obligation is measured based on independent actuarial valuation using projected unit credit method as at the reporting date.

Deferred bonus scheme The Group established a deferred bonus scheme for eligible employees with the aim to make total employee remuneration sufficiently competitive to recruit, reward, retain and motivate outstanding employees. The deferred bonus is paid out in cash over three years if the eligible employees remain employed by the Group.

218 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

22. EMPLOYEE BENEFITS (continued) Share-based payment scheme (a) LTIP On 25 March 2011, the Group established the LTIP scheme to grant non-transferrable convertible units to eligible employees of the Group.

The LTIP units granted will vest in the participants within three years from the date of grant. All LTIP units that have been granted and vested must be surrendered to the Company for allotment of shares of the Company on the basis of one share for each LTIP unit. The LTIP units have no exercise price and the LTIP scheme shall be in force for a period of 10 years from 25 March 2011.

The movement in the number of the outstanding LTIP as at 31 December 2018 are as follows:

Key management personnel Other eligible employees 2018 2017 2018 2017 ’000 ’000 ’000 ’000 No. of LTIP Outstanding as at 1 January 1,948 2,575 4,110 4,701 Granted during the year 1,980 2,023 1,620 4,662 Forfeited during the year – – (513) (613) Exercised during the year (1,933) (2,650) (3,061) (4,640) Outstanding at 31 December 1,995 1,948 2,156 4,110

Exercisable at 31 December – – – –

The LTIP outstanding as at 31 December has the following features:

2018 2017 Exercise price Nil Nil Weighted average contractual life (in years) 3.29 4.17

219 Financial Statements Notes to the Financial Statements

22. EMPLOYEE BENEFITS (continued) Share-based payment scheme (continued) (a) LTIP (continued) Fair value of options and assumptions The fair value of services received in return for the LTIP granted is determined based on Trinomial Option Pricing Model, and taking into account the terms and conditions under which the units were granted.

During the year, a total of 3,600,000 (2017: 6,685,000) equity settled LTIP units were granted to eligible employees.

The inputs to the models used for the LTIP granted during the year are as follows:

Key management personnel Other eligible employees 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 RM5.97 to RM5.84 to RM6.01 to RM6.12 to Fair values at grant date RM6.03 RM5.90 RM6.07 RM6.19

Share price at grant date RM6.03 RM5.90 RM6.07 RM6.19 Expected volatility (average volatility) 13.31% 15.19% 13.31% 15.19% Option life (expected average life) 2.75 years 3.75 years 2.92 years 3.92 years Expected dividend yield 0.49% 0.49% 0.49% 0.49% Risk free rate 3.76% – 3.82% 3.56% – 3.58% 3.76% – 3.82% 3.56% – 3.58%

(b) EOS On 15 June 2015, at an extraordinary general meeting, the Company’s shareholders approved the establishment of the EOS scheme to grant share options to eligible personnel.

The EOS options granted in each year will vest in the participants over a 3-year period. Each EOS option gives the participant a right to receive one share, upon exercise of the option and subject to the payment of the exercise price.

The exercise price for the EOS option granted shall be determined by the Board which shall be based on the 5-day weighted average market price of the underlying shares a day immediately preceding the date of offer with a discount of not more than 10% or such other percentage of discount as may be permitted by Bursa Securities or any other relevant regulatory from time to time (subject to the Board’s discretion to grant the discount).

The EOS shall be in force for a period of 10 years from 22 June 2015.

The movement in the number of the outstanding EOS options as at 31 December 2018 are as follows:

Key management personnel Other eligible employees Weighted No. of Weighted No. of average options average options exercise price (‘000) exercise price (‘000) 2018 Outstanding as at 1 January RM6.26 14,229 RM6.17 5,310 Granted during the year RM6.02 8,715 RM6.02 11,713 Forfeited during the year – – RM6.24 (1,085) Exercised during the year – – RM5.67 (226) Outstanding at 31 December RM6.17 22,944 RM6.06 15,712

Exercisable at 31 December RM6.12 8,783 RM6.08 3,410

220 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

22. EMPLOYEE BENEFITS (continued) Share-based payment scheme (continued) (b) EOS (continued) Key management personnel Other eligible employees Weighted No. of Weighted No. of average options average options exercise price (‘000) exercise price (‘000) 2017 Outstanding as at 1 January RM6.26 14,229 RM6.17 8,077 Forfeited during the year – – RM6.30 (2,174) Exercised during the year – – RM5.67 (593) Outstanding at 31 December RM6.26 14,229 RM6.17 5,310

Exercisable at 31 December RM5.97 4,039 RM6.02 2,480

The EOS outstanding as at 31 December has the following features:

2018 2017 Exercise prices RM5.67 – RM6.55 RM5.67 – RM6.55 Weighted average contractual life (in years) 8.10 9.32

Fair value of options and assumptions The fair value of services received in return for the EOS granted is determined based on Trinomial Option Pricing Model, and taking into account the terms and conditions under which the options were granted.

During the year, a total of 20,428,000 (2017: Nil) equity settled EOS options with an exercise price of RM6.02 (2017:Nil) were granted to eligible employees.

The inputs to the models used for the EOS granted during the year are as follows:

Key management personnel Other eligible employees 2018 2017 2018 2017 Fair value at grant date RM1.58 – RM1.58 –

Share price at grant date RM6.00 – RM6.00 – Expected volatility (average volatility) 15.06% – 15.06% – Option life (expected average life) 7.0 years – 7.0 years – Expected dividend yield 0.50% – 0.50% – Risk free rate 3.99% – 3.99% –

(c) Fortis Employee Stock Option Plan (“Fortis ESOP”) Fortis, a non-wholly owned indirect subsidiary of the Company, has provided share-based payment scheme, “Employee Stock Option Plan 2007” and “Employee Stock Option Plan 2011” to the eligible employees and directors of Fortis and its subsidiaries. The schemes were approved by the shareholders of Fortis in 2007 and 2011 respectively.

Each option under the schemes, when exercised would be converted into one fully paid up equity share of INR10.00 each of Fortis. There are no conditions for vesting other than continued employment with Fortis and its subsidiaries.

221 Financial Statements Notes to the Financial Statements

22. EMPLOYEE BENEFITS (continued) (c) Fortis Employee Stock Option Plan (“Fortis ESOP”) (continued) The movement in the number of the outstanding Fortis ESOP options from the date the Group acquired Fortis (“acquisition date”) to 31 December 2018 are as follows:

Weighted No. of average options exercise price (‘000) 2018 Outstanding as at acquisition date INR151.58 3,353 Forfeited during the period INR158.00 (68) Exercised during the period INR95.62 (520) Outstanding at 31 December INR161.96 2,765

Exercisable at 31 December INR161.96 2,765

The Fortis ESOP options outstanding as at 31 December has the following features:

2018 Exercise prices INR50 – INR163.30 Weighted average contractual life (in years) 4.73

(d) Malar Employee Stock Option Plan (“Malar ESOP”) Fortis Malar Hospital Limited (“FHML”), a non-wholly owned indirect subsidiary of the Company, has provided share-based payment scheme, Malar Employee Stock Option Plan 2008 (“Malar ESOP”), to the eligible employees of FHML and its subsidiary.

The Malar ESOP was approved by the board of directors of FHML on 31 July 2008/28 May 2009 and by FHML’s shareholders in the annual general meeting held on 29 September 2008/21 August 2009. The Malar ESOP was effective from 21 August 2009.

The Malar ESOP options will vest in the participants equally over a 4-year period.

There shall be no lock in period after the options have vested. The vested options will be eligible to be exercised on the vesting date itself. Notwithstanding any provisions to the contrary in this plan the options must be exercised before the end of the tenure of the plan.

The movement in the number of the outstanding Malar ESOP options from acquisition date to 31 December 2018 are as follows:

Weighted No. of average options 2018 exercise price (‘000) Outstanding as at acquisition date and as at 31 December 2018 INR26.20 78,750

Exercisable at 31 December INR26.20 78,750

The Malar ESOP options outstanding as at 31 December has the following features:

2018 Exercise price INR26.20 Weighted average contractual life (in years) 5.0

222 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

22. EMPLOYEE BENEFITS (continued) (e) SRL Employee Stock Option Plan (“SRL ESOP”) SRL Limited (“SRL”), a non-wholly owned indirect subsidiary of the Company, has provided share-based payment scheme, “Employee Stock Option Plan 2009” and “Employee Stock Option Plan 2013” to the eligible employees and directors of SRL and its subsidiaries. The schemes were approved by the shareholders of SRL on 17 August 2009 and 20 September 2013 respectively.

There are no conditions for vesting other than continued employment with SRL and its subsidiaries.

The movement in the number of the outstanding SRL ESOP options from acquisition date to 31 December 2018 are as follows:

Weighted No. of average options exercise price (‘000) 2018 Outstanding as at acquisition date and as at 31 December 2018 INR310.99 1,254

Exercisable at 31 December INR40 537

The SRL ESOP options outstanding as at 31 December has the following features:

2018 Exercise prices INR40 – INR674 Weighted average contractual life (in years) 3.3

Value of employee services received for issue of share options Group Company 2018 2017 2018 2017 Note RM’000 RM’000 RM’000 RM’000 Share-based payment expenses included in staff costs 28 38,964 52,186 11,309 12,069

Included in share-based payment expenses of the Group is an amount of RM54,000 (2017: Nil) representing total share- based payment expenses relating to the Fortis ESOP, Malar ESOP and SRL ESOP.

223 Financial Statements Notes to the Financial Statements

23. RETIREMENT BENEFITS Certain Malaysia-based and India-based subsidiaries of the Group have defined benefits plans that provide pension benefits for employees upon retirement. The plans entitle a retired employee to receive one lump sum payment upon retirement. At the end of the financial year, the present values of the unfunded obligations are as follows:

Group 2018 2017 Note RM’000 RM’000 Present value of unfunded obligations 76,377 29,427

Movements in the liability for defined benefits obligations At 1 January 29,427 26,446 Included in profit or loss –– Current service costs 4,511 5,061 –– Past service credit 33 – –– Interest on obligation 1,210 768 5,754 5,829 Included in other comprehensive income Remeasurement loss Actuarial gain/(loss) arising from: –– demographic assumptions 57 – –– financial assumptions 1,207 (1,583) –– experience adjustments (42) 9 31 1,222 (1,574) Others –– Additions through business combinations 42,422 – –– Benefits paid (2,013) (1,364) –– Translation differences (435) 90 At 31 December 76,377 29,427

Actuarial assumptions Principal actuarial assumptions at the end of the financial year (expressed as weighted averages):

Group 2018 2017 % % Discount rate 5.0 – 8.4 5.0 – 7.2 Future salary growth 5.0 – 8.0 5.0 – 7.5 Future mortality 0.1 – 0.7 0.0 – 0.7

224 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

23. RETIREMENT BENEFITS (continued) Sensitivity analysis The calculation of the defined benefit obligation is sensitive to the assumptions set out above. The following table summarises how the impact on the retirement benefits obligation at the end of the financial year would have increased/(decreased) as a result of a change in the respective assumptions by 1%, holding other assumptions constant.

Group Increase Decrease RM’000 RM’000 2018 Discount rate (1% movement) (7,130) 8,468 Future salary growth (1% movement) 8,316 (7,112) Future mortality (1% movement) – –

2017 Discount rate (1% movement) (3,204) 3,880 Future salary growth (1% movement) 3,779 (3,170) Future mortality (1% movement) (3) 3

Whilst the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation to the sensitivity of the assumptions shown.

24. EMPLOYMENT TERMINATION BENEFITS Certain Turkish-based subsidiaries of the Group are required by local laws to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, is called up for military services, dies or who retires after completing 25 years of service (20 years for women) and reaches the retirement age (58 years for women and 60 years for men).

The termination benefits is calculated as one month gross salary for every employment year and as at 31 December 2018, the ceiling amount has been limited to TL5,434 (2017: TL4,732), equivalent to RM4,240 (2017: RM4,916). The reserve has been calculated by estimating the present value of future probable obligations of these subsidiaries arising from retirement. The calculation was based upon the retirement pay ceiling announced by the local government.

Group 2018 2017 Note RM’000 RM’000 Present value of unfunded obligations 16,883 16,199

Movements in the liability for defined benefits obligations At 1 January 16,199 14,548 Included in profit or loss –– Current service costs 2,390 2,752 –– Interest on obligation 1,115 1,416 3,505 4,168 Remeasurement loss –– Actuarial loss arising from financial assumptions 31 13,686 16,737

Others –– Benefits paid (13,911) (16,541) –– Translation differences (2,596) (2,713) At 31 December 16,883 16,199

225 Financial Statements Notes to the Financial Statements

24. EMPLOYMENT TERMINATION BENEFITS (continued) Actuarial assumptions Principal actuarial assumptions at the end of the financial year (expressed as weighted averages):

Group 2018 2017 Annual inflation rate 11.0% 6.0% Discount rate 15.0% 11.0% Retirement pay ceiling amount TL 5,434 TL 4,732

Sensitivity analysis No sensitivity analysis is presented as any reasonably possible changes in the above key assumptions are not expected to materially affect the employment termination benefits obligation.

25. TRADE AND OTHER PAYABLES Group Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Non-current Trade payables 3,779 16,799 – – Other payables 38,344 37,616 – – Accruals 15,557 10,589 – – CCPS liabilities – 7,895 – – Put options granted to non-controlling interests 567,586 837,526 – – 625,266 910,425 – – Deposits 65,998 59,484 – – 691,264 969,909 – –

Current Trade payables 1,385,657 988,928 – – Trade amounts due to associates 42,341 – – – Other payables 365,577 554,569 3,277 276 Non-trade amounts due to associates 1,171 853 – – Non-trade amounts due to joint ventures 927 400 – – Accruals 961,266 777,335 8,090 7,329 Interest payables 42,637 36,082 – – CCPS liabilities – 85,290 – – Financial guarantee provision 39,739 35,273 – – Put options granted to non-controlling interests 706,632 160,783 – – 3,545,947 2,639,513 11,367 7,605 Deposits and rental advance billings 135,296 87,084 – – Contract liabilities 70,325 69,230 – – 3,751,568 2,795,827 11,367 7,605

226 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

25. TRADE AND OTHER PAYABLES (continued) Contract liabilities Contract liabilities mainly relate to considerations received/receivable from students for education services. Revenue from educational services is recognised overtime during the course semester. The contract liabilities are recognised as revenue over a period of 30 to 210 days when the services is rendered.

Significant changes to contract liabilities balance during the year are as follows:

Group Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Contract liabilities at the beginning of the period recognised as revenue 69,230 60,319 – –

CCPS liabilities Ravindranath GE Medical Associates Pte Ltd (“RGE”), a 76.25% owned subsidiary, issued CCPS to its non-controlling shareholders. The CCPS are currently convertible at the option of the holder to ordinary shares of RGE and will be compulsory converted to ordinary shares at the end of 20 years from the date of issue. The conversion ratios of the different tranches of CCPS held by a non-controlling interest vary upon the occurrence of certain pre-determined events as agreed amongst RGE’s shareholders. Accordingly, these CCPS are classified as financial liabilities at fair value through profit or loss. When the conversion ratios for each tranche of CCPS are fixed, the CCPS are reclassified to equity at its carrying amount.

During the year, as the conversion ratio for the remaining tranches of CCPS held by the non-controlling interests was fixed, all CCPS were reclassified from other payables to equity. In 2017, change in fair value loss amounting to RM13,753,000 was recognised in profit or loss.

Put options granted to non-controlling interests As at 31 December 2018, put options granted to non-controlling interests consist of:

(i) Pursuant to the acquisition of RGE, the Group granted the following put options to a non-controlling interest of RGE:

a. An option for the non-controlling interest to sell its 7.13% interest in RGE, on a fully diluted basis, to the Group at a fixed consideration of INR1,463.0 million (equivalent to RM85.9 million) (2017: RM93.3 million) less price adjustment of not more than INR110.0 million, upon achievement of a certain financial target pursuant to an option agreement entered with the non-controlling interest. As at 31 December 2018, this put option does not have any value as the target is not met; and

b. Another option for the non-controlling interest to sell its remaining interest in RGE to the Group at the prevailing market price on the date the option is exercised. This put option can only be exercised from December 2020 onwards and does not have an expiry date.

(ii) Pursuant to the acquisition of Continental Hospitals Private Limited (“CHL”), the Group granted a put option to a non- controlling interest to sell its existing interest in CHL to the Group at the prevailing market price on the date the option is exercised. The put option can only be exercised from March 2018 onwards and does not have an expiry date.

(iii) Pursuant to the acquisition of City Hospitals and Clinics AD (“City Clinic”), the Group granted put options to non-controlling interests of Acibadem City Clinic B.V. (“ACC”), who were formerly shareholders of City Clinic, to sell their shares in ACC, to the Group at the higher of the prevailing market price or an amount determined by the formula stated in the agreement. The put options can only be exercised from June 2019 to May 2022.

(iv) Pursuant to the disposal of 15% equity interest in ACC by the Group to International Finance Corporation (“IFC”), the Group granted put options to IFC to sell their shares in ACC, to the Group at the higher of the cost of investment of IFC or an amount determined by the formula stated in the agreement. The put options can only be exercised from June 2022 to May 2026.

227 Financial Statements Notes to the Financial Statements

25. TRADE AND OTHER PAYABLES (continued) Put options granted to non-controlling interests (continued) (v) Pursuant to the acquisition of Angsana Holdings Pte. Ltd. (“Angsana”), the Group granted put option to the non-controlling interest to sell their existing interest in Angsana to the Group at the prevailing market price on the date the option are exercised. The put option can only be exercised from August 2020 onwards and does not have an expiry date.

(vi) Pursuant to a shareholders’ agreement and exit agreement entered into by SRL, Fortis and certain non-controlling interest of SRL, Fortis granted a cash put option to certain non-controlling interest of SRL to sell their shares in SRL to Fortis upon the occurrence of certain trigger event (i.e. Cash Option Trigger Event) as stated by the exit agreement. The Cash Option Trigger Event occurred prior to the Group’s acquisition of Fortis and the exercise period for the cash put option was extended several times, with the latest extension of the exercise period given till 31 August 2019.

During the year, change in fair values of put options granted to non-controlling interests amounting to RM296,334,000 gain (2017: RM45,229,000 loss) was recognised in equity (see Note 37 (vii)).

In 2017, the Group recognised RM139,014,000 and RM22,426,000 being the fair value of put options granted to non-controlling interests relating to the disposal of 15% equity interest in ACC and acquisition of Angsana.

Financial guarantee provision Financial guarantee comprises a proportionate guarantee given by Parkway Holdings Limited (“PHL”), a wholly-owned subsidiary, to a bank in respect of a term loan facility granted to KHPL, a 50% owned joint venture. On 5 January 2017, the bank served a notice to KHPL that an Event of Default has occurred. In view that KHPL is unlikely to be able to repay the loan, PHL made a provision for its 50% share of the amounts that KHPL owes the licensed bank.

26. DERIVATIVE ASSETS AND LIABILITIES Group 2018 2017 RM’000 RM’000 Non-current assets Foreign exchange forward contracts 722 5,761 Cross currency interest rate swaps – 5,036 Put option – 1,625 722 12,422

Current assets Foreign exchange forward contracts 5,559 13,406 Put option 3,756 – 9,315 13,406

Non-current liabilities Foreign exchange forward contracts (956) – Interest rate swaps (2,021) (3,742) Cross currency interest rate swaps (9,191) – (12,168) (3,742)

Current liabilities Interest rate swaps (1,070) (498) Call option granted to NCI (4,861) (22,493) (5,931) (22,991)

228 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

26. DERIVATIVE ASSETS AND LIABILITIES (continued) Nominal value Fair value 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Derivatives at fair value through profit or loss –– Foreign exchange forward contracts 808,076 413,415 5,325 19,167 –– Call option granted to NCI 29,355 31,886 (4,861) (22,493) –– Put option 16,199 16,288 3,756 1,625 Derivatives used for hedging –– Interest rate swaps 1,040,480 1,023,701 (3,091) (4,240) –– Cross currency interest rate swaps 380,626 382,719 (9,191) 5,036 2,274,736 1,868,009 (8,062) (905)

The Group enters into interest rate swaps, cross currency interest rate swaps and foreign exchange forward contracts to manage interest rate fluctuations and exchange rate fluctuations on certain loans, as set out in Note 37(v) and (vi).

Call option granted to NCI The Group granted a call option to non-controlling interests of RGE to purchase the Group’s 3% interest in RGE on a fully diluted basis, at a fixed price of INR500.0 million (equivalent to RM33.0 million), pursuant to an option agreement entered with the non- controlling interests. The call option granted to non-controlling interests is classified as a financial derivative liability.

During the year, change in fair value of RM17,202,000 gain (2017: RM4,753,000 loss) was charged to profit or loss.

Put option On disposal of the Group’s controlling stake in FWD Singapore Pte Ltd (“FSPL”)(formerly known as Shenton Insurance Pte. Ltd.), the Group entered into an agreement with the purchaser and is granted a put option to sell all of its remaining shares in FSPL only after April 2019 and at the higher of the prevailing market price or consideration determined pursuant to the agreement. The put option is classified as a financial derivative asset.

During the year, change in fair value of RM2,102,000 gain (2017: Nil) was recognised in profit or loss.

Offsetting financial assets and financial liabilities The Group’s derivative transactions are entered into under International Swaps and Derivatives Association (“ISDA”) master netting agreements. In general, under such agreements, the amounts owed by each counterparty in respect of the same transactions outstanding in the same currency under the agreement are aggregated into a single net amount that is payable by one party to the other. In certain circumstances, for example when a credit event such as a default occurs, all outstanding transactions under the agreement are terminated, the termination value is assessed and only a single net amount is due or payable in settlement of all outstanding transactions.

The above agreements do not meet the criteria for offsetting in the statement of financial position as the right to set-off recognised amounts is enforceable only following an event of default, insolvency or bankruptcy of the Group or the counterparties. In addition, the Group and its counterparties do not intend to settle on a net basis or to realise the assets and settle the liabilities simultaneously in its normal course of business.

229 Financial Statements Notes to the Financial Statements

27. REVENUE Group Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Healthcare services 11,006,467 10,630,873 – – Education services 267,336 261,718 – – Management fees 10,284 13,139 – – Revenue from contracts with customers 11,284,087 10,905,730 – – Rental income 233,206 234,781 – – Dividend income –– from subsidiaries – – 2,573,565 603,979 –– from unquoted money market funds 3,639 2,128 3,639 2,128 11,520,932 11,142,639 2,577,204 606,107

Included in the dividend income from subsidiaries was an amount of RM2,523,565,000 dividend which was settled after year end by the Company’s subscription of new ordinary shares of the subsidiary.

Disaggregation of revenue from contracts with customers: In the following table, revenue from contracts with customers is disaggregated by reportable segments.

Healthcare Education Management services services fees Total RM’000 RM’000 RM’000 RM’000 2018 Reportable segments Singapore 3,801,649 11,119 554 3,813,322 Malaysia 2,000,266 256,029 – 2,256,295 India 847,630 188 1,888 849,706 North Asia 498,494 – 347 498,841 Central and Eastern Europe, Middle East and North Africa (“CEEMENA”) 3,676,198 – – 3,676,198 Others 182,230 – 7,495 189,725 11,006,467 267,336 10,284 11,284,087

2017 Reportable segments Singapore 3,754,830 12,245 983 3,768,058 Malaysia 1,817,691 249,473 – 2,067,164 India 708,039 – 59 708,098 North Asia 331,904 – 362 332,266 CEEMENA 3,853,527 – – 3,853,527 Others 164,882 – 11,735 176,617 10,630,873 261,718 13,139 10,905,730

230 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

27. REVENUE (continued) Healthcare services revenue Healthcare services revenue generally relates to contracts with patients in which performance obligations are to provide healthcare services. The performance obligations for inpatient services are generally satisfied over a short period, and revenue from inpatients is recorded when the healthcare services is performed. The performance obligations for outpatient and daycase services are generally satisfied over a period of less than one day, and revenue is also recorded when the healthcare services is performed. The Group has a range of credit terms which are typically short term, in line with market practice, and without any financing component. There are no variable considerations, and no obligation for returns or refunds or warranties for healthcare- related services.

Education services income Education services revenue primarily consist of tuition fees. Tuition fee for educational services not yet provided is recorded as contract liability (see Note 25) and recognised as revenue over the period as the services is rendered.

Management fees Management fee is recognised over time for management and consultancy services provided. The stage of completion is assessed by reference to surveys of work performed. The Group has a range of credit terms which are typically short term, in line with market practice, and without any financing component.

28. STAFF COSTS Group Company 2018 2017 2018 2017 Note RM’000 RM’000 RM’000 RM’000 Salaries, bonuses and other costs 4,325,300 4,305,145 31,083 22,991 Contribution to defined contribution plans 173,811 172,411 717 819 Equity-settled share-based payments 22 38,964 52,186 11,309 12,069 4,538,075 4,529,742 43,109 35,879

29. FINANCE INCOME AND COSTS Group Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Finance income Interest income 128,052 78,779 25,491 18,689 Exchange gain on loans 110 51,614 – – Fair value gain on financial derivatives 46,781 21,446 235 – 174,943 151,839 25,726 18,689

Finance costs Interest expense on loans and borrowings (283,682) (277,196) – – Interest expense on amount due to subsidiaries – – (2,023) – Exchange loss on loans (644,949) (463,804) – – Fair value loss on financial derivatives (11,838) (4,753) – – Fair value loss on CCPS liabilities – (13,753) – – Other finance costs (38,353) (34,798) (19) (8) (978,822) (794,304) (2,042) (8)

231 Financial Statements Notes to the Financial Statements

30. PROFIT BEFORE TAX (a) Auditors’ remuneration charged to profit or loss comprises: Group Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Audit fees –– KPMG Malaysia (1,212) (1,021) (458) (373) –– Affiliates of KPMG Malaysia (7,850) (5,123) (424) (452) –– Other auditors (778) (765) – – Non-audit fees paid to –– KPMG Malaysia (810) (680) (810) (680) –– Affiliates of KPMG Malaysia (859) (775) – –

(b) Profit before tax is arrived at after crediting/(charging): Group Company 2018 2017 2018 2017 Note RM’000 RM’000 RM’000 RM’000 Material (expenses)/income Exchange gains/(loss) – net 67,699 (66,453) 14,212 (60,703) Impairment loss (made)/written back on: –– Investment in subsidiary – – (2,295,921) 72 –– Goodwill (66,168) – – – –– Investment in a joint venture 9 (33,353) – – – –– Trade and other receivables 34,539 (11,066) – – –– Amounts due from associates – 901 – – –– Amounts due from joint ventures (52) (575) – – Write-off: –– Property, plant and equipment 3 (1,219) (2,874) – – –– Intangible assets 6 (174) (248) – – –– Inventories (1,903) (5,137) – – –– Trade and other receivables (13,337) (28,074) – – Gain on disposal of property, plant and equipment 831 15,349 107 – Gain on disposal of a subsidiary 44 – 1,149 – – Realised gain on foreign exchange on return of capital by a foreign subsidiary – – – 202,365 Gain on disposal of available-for-sale financial instruments –– quoted – 554,500 – – –– unquoted – 4,695 – 167 Gain/(Loss) on disposal of businesses 42 2,925 (776) – – Change in fair value of investment properties 5 74,192 22,922 – – Provision for financial guarantee given on a joint venture’s loan facility (3,967) (1,570) – – Insurance compensation for flood 17,186 – – –

232 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

31. OTHER COMPREHENSIVE INCOME 2018 2017 Before tax Tax benefit Net of tax Before tax Tax benefit Net of tax RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group (Note 11) (Note 11) Items that may be reclassified subsequently to profit or loss Foreign currency translation differences from foreign operations (349,175) – (349,175) (790,190) – (790,190) Hedge of net investments in foreign operations (78,542) – (78,542) 21,344 – 21,344 Available-for-sale financial instruments: –– Changes in fair value – – – 239,990 – 239,990 –– Reclassification adjustments for gain on disposal included in profit or loss – – – (559,195) – (559,195) – – – (319,205) – (319,205) Cash flow hedge: –– Changes in fair value 2,571 – 2,571 731 – 731 –– Reclassification adjustments for losses included in profit or loss 1,678 – 1,678 2,429 – 2,429 4,249 – 4,249 3,160 – 3,160 (423,468) – (423,468) (1,084,891) – (1,084,891) Items that will not be reclassified subsequently to profit or loss Remeasurement of defined benefit liabilities (Note 23 and 24) (14,908) 3,667 (11,241) (15,566) 3,321 (12,245) Net change in fair value of FVOCI financial instruments 759 – 759 – – – (14,149) 3,667 (10,482) (15,566) 3,321 (12,245) (437,617) 3,667 (433,950) (1,100,457) 3,321 (1,097,136)

2018 2017 Before tax Tax benefit Net of tax Before tax Tax benefit Net of tax RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Company (Note 11) (Note 11) Items that may be reclassified subsequently to profit or loss Foreign currency translation differences from foreign operations 8 – 8 (27) – (27) Available-for-sale financial instruments: –– Changes in fair value – – – (300) – (300) –– Reclassification adjustments for gain on disposal included in profit or loss – – – (167) – (167) – – – (467) – (467) 8 – 8 (494) – (494) Items that will not be reclassified subsequently to profit or loss Net change in fair value of FVOCI financial instruments 759 – 759 – – –

Total 767 – 767 (494) – (494)

233 Financial Statements Notes to the Financial Statements

32. KEY MANAGEMENT PERSONNEL COMPENSATION Key management personnel of the Group are those persons having the authority and responsibility for planning, directing and controlling the activities of the Group. The Group considers the Directors of the Company to be key management personnel in accordance with MFRS 124, Related Party Disclosures.

The key management personnel compensation are as follows:

Group Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Non-executive Directors: –– Fees 4,719 5,267 3,993 2,578 –– Remuneration and other benefits 25 8 25 8 4,744 5,275 4,018 2,586

Executive Directors: –– Fees 2,065 1,556 – – –– Remuneration and other benefits 21,366 17,672 16,092 11,026 –– Share-based payment 20,463 23,291 8,058 9,555 43,894 42,519 24,150 20,581 48,638 47,794 28,168 23,167

The estimated monetary value of Directors’ benefit-in-kind is RM250,000 (2017: RM327,000).

33. INCOME TAX EXPENSE Group Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Current tax expense Current year 394,255 330,955 3,278 4,670 (Over)/Under provided in prior years (60,263) 14,771 (387) (335) 333,992 345,726 2,891 4,335

Deferred tax income Reversal of temporary differences (67,670) (6,394) – – Over provided in prior years (3,712) (4,707) – – (71,382) (11,101) – – 262,610 334,625 2,891 4,335

234 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

33. INCOME TAX EXPENSE (continued) Reconciliation of income tax expense Group Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Profit before tax 752,470 1,164,453 246,664 715,361 Less: Share of profits of associates (net of tax) (11,515) (1,543) – – Share of profits of joint ventures (net of tax) (1,897) (577) – – 739,058 1,162,333 246,664 715,361

Income tax calculated using Malaysia tax rate of 24% (2017: 24%) 177,374 278,960 59,199 171,687 Effect of tax rates in foreign jurisdictions (30,257) (62,718) (205) (102) Tax exempt income (62,790) (137,657) (618,636) (196,067) Tax incentive – (2,672) – – Non-deductible expenses 93,709 163,543 562,920 29,152 Recognition of previously unrecognised deferred tax assets (11,652) (11,198) – – Deferred tax assets not recognised 160,201 96,303 – – (Over)/Under provided in prior years (63,975) 10,064 (387) (335) 262,610 334,625 2,891 4,335

34. EARNINGS PER SHARE Group 2018 2017 Basic and diluted earnings per share is based on: Net profit attributable to ordinary shareholders (RM’000) Profit after tax and non-controlling interest 627,687 969,953 Perpetual securities distribution (85,846) (38,639) 541,841 931,314 Basic earnings per share Weighted average number of shares (’000) 8,288,793 8,236,349

Basic earnings per share (sen) 6.54 11.31

235 Financial Statements Notes to the Financial Statements

34. EARNINGS PER SHARE (continued) Diluted earnings per share For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares.

Group 2018 2017 Weighted average number of ordinary shares used in calculation of basic earnings per share (’000) 8,288,793 8,236,349 Weighted average number of unissued ordinary shares from units under LTIP (’000) 3,264 4,080 Weighted average number of unissued ordinary shares from share options under EOS (’000) 55 196 Weighted average number of ordinary shares used in calculation of diluted earnings per share (’000) 8,292,112 8,240,625

Diluted earnings per share (sen) 6.53 11.30

At 31 December 2018, 32,850,000 outstanding EOS options (2017: 13,253,000) were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive.

The average market value of the Company’s shares for purposes of calculating the dilutive effect of share options was based on quoted market prices for the period during which the options were outstanding.

35. DIVIDENDS Dividends recognised by the Company:

Per ordinary Total Date of share amount payment Sen RM’000 2018 First and final single tier cash dividend for financial year ended 31 December 2017 3.0 247,338 18 July 2018

2017 First and final single tier cash dividend for financial year ended 31 December 2016 3.0 247,171 18 July 2017

The Directors have proposed the following dividend which is subject to shareholders’ approval at the forthcoming Annual General Meeting:

Per ordinary Total share amount Sen RM’000 First and final single tier cash dividend for financial year ended 31 December 2018 3.0 263,079

* Based on 8,769,296,000 ordinary shares as at 31 December 2018.

236 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

36. SEGMENT REPORTING Operating segments The Group has seven reportable segments, as described below, which are the Group’s strategic business units. Except for IMU Health and PLife REIT, the strategic business units offer hospital and healthcare services in different locations, and are managed separately. IMU Health is an educational service provider while PLife REIT is a real estate investment trust. For each of the strategic business units, the Group’s Board of Directors reviews internal management reports on at least a quarterly basis.

The Group’s reportable segments comprise:

• Singapore • Malaysia • India • North Asia • Acibadem Holdings • IMU Health • PLife REIT

Management monitors the operating results of each of its business units for the purpose of making decisions on resource allocation and performance assessment. Performance is measured based on segment EBITDA.

Inter-segment pricing is determined on negotiated basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

237 Financial Statements Notes to the Financial Statements

36. SEGMENT REPORTING (continued) Acibadem IMU Parkway Pantai (1) Holdings Health Singapore Malaysia India North Asia PPL Others(2) CEEMENA (3) Malaysia PLife REIT (1) Others (4) Eliminations Total 2018 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Revenue and expenses Revenue from external customers 3,890,725 2,019,834 851,269 499,623 188,936 3,676,198 257,540 133,168 3,639 – 11,520,932 Inter-segment revenue 100,711 1,000 – – 1,879 – 3,461 202,531 2,573,636 (2,883,218) – Total segment revenue 3,991,436 2,020,834 851,269 499,623 190,815 3,676,198 261,001 335,699 2,577,275 (2,883,218) 11,520,932

EBITDA 1,213,407 578,513 6,319 (208,714) (1,178) 617,320 84,935 321,688 2,509,239 (2,643,830) 2,477,699

Depreciation and impairment losses of property, plant and equipment (214,268) (157,622) (63,374) (146,981) (6,156) (242,430) (14,364) (34,647) (859) – (880,701) Amortisation and impairment losses of intangible assets (3,644) (709) (10,439) (23,115) – (19,760) (790) – – – (58,457) Foreign exchange differences (239) 68 41,073 (213) 9,926 (91) (1) 2,964 14,212 – 67,699 Finance income 603 22,830 49,056 48,176 40,690 34,622 5,701 19 25,726 (52,480) 174,943 Finance costs (14,669) (2,329) (56,458) (86,933) (24,546) (817,452) (16) (26,857) (2,042) 52,480 (978,822) Share of profits of associates (net of tax) 1,667 – 9,848 – – – – – – – 11,515 Share of profits of joint ventures (net of tax) 1,213 – 669 15 – – – – – – 1,897 Others 29,873 (6,070) (86,301) 2,925 – – – – (3,730) – (63,303) Profit/(Loss) before tax 1,013,943 434,681 (109,607) (414,840) 18,736 (427,791) 75,465 263,167 2,542,546 (2,643,830) 752,470 Income tax (expense)/credit (140,713) (88,823) (2,355) (11,987) (23,742) 51,040 (19,733) (23,406) (2,891) – (262,610) Profit/(Loss) for the year 873,230 345,858 (111,962) (426,827) (5,006) (376,751) 55,732 239,761 2,539,655 (2,643,830) 489,860

Assets and liabilities Cash and cash equivalents 202,779 625,241 4,339,118 701,685 448,447 73,512 24,789 67,201 1,280,626 – 7,763,398 Other assets 12,321,766 4,795,784 6,634,382 3,206,234 4,389,347 5,027,213 530,141 4,519,762 196,423 (4,269,940) 37,351,112 Segment assets as at 31 December 2018 12,524,545 5,421,025 10,973,500 3,907,919 4,837,794 5,100,725 554,930 4,586,963 1,477,049 (4,269,940) 45,114,510

Loans and borrowings 7,310 256 1,159,274 2,153,906 1,551,003 3,504,877 247 2,077,177 – – 10,454,050 Other liabilities 4,364,225 546,688 3,244,401 327,793 327,921 1,040,113 149,212 353,781 69,181 (4,269,940) 6,153,375 Segment liabilities as at 31 December 2018 4,371,535 546,944 4,403,675 2,481,699 1,878,924 4,544,990 149,459 2,430,958 69,181 (4,269,940) 16,607,425

238 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

EBITDA 1,213,407 578,513 6,319 (208,714) (1,178) 617,320 84,935 321,688 2,509,239 (2,643,830) 2,477,699

239 Financial Statements Notes to the Financial Statements

36. SEGMENT REPORTING (continued) Acibadem IMU Parkway Pantai (1) Holdings Health Singapore Malaysia India North Asia PPL Others (2) CEEMENA (3) Malaysia PLife REIT (1) Others(4) Eliminations Total 2017 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Revenue and expenses Revenue from external customers 3,848,308 1,836,415 708,596 332,658 176,615 3,853,527 250,386 134,006 2,128 – 11,142,639 Inter-segment revenue 106,377 1,000 – – 1,138 – 3,875 208,311 60,075 (380,776) – Total segment revenue 3,954,685 1,837,415 708,596 332,658 177,753 3,853,527 254,261 342,317 62,203 (380,776) 11,142,639

EBITDA 1,135,100 513,755 13,696 (251,954) 12,722 617,888 80,645 282,684 9,236 (134,292) 2,279,480

Depreciation and impairment losses of property, plant and equipment (225,822) (143,717) (64,907) (134,242) (5,386) (292,047) (13,988) (34,795) (865) – (915,769) Amortisation and impairment losses of intangible assets (3,643) (709) (10,077) (22,624) – (24,473) (785) – – – (62,311) Foreign exchange differences (119) 106 (182) (137) (9,824) (447) (90) 4,943 (60,703) – (66,453) Finance income 604 17,000 4,064 35,599 98,521 26,303 5,760 6,103 18,689 (60,804) 151,839 Finance costs (12,825) (4,106) (61,480) (104,136) (119,126) (528,015) (286) (25,108) (26) 60,804 (794,304) Share of profits of associates (net of tax) 1,543 – – – – – – – – – 1,543 Share of profits of joint ventures (net of tax) 1,402 – (947) 122 – – – – – – 577 Others 16,548 – (1,570) (776) – 1,149 – – 554,500 – 569,851 Profit/(Loss) before tax 912,788 382,329 (121,403) (478,148) (23,093) (199,642) 71,256 233,827 520,831 (134,292) 1,164,453 Income tax (expense)/credit (157,261) (110,669) 6,681 (18,643) (29,021) 21,838 (19,484) (23,731) (4,335) – (334,625) Profit/(Loss) for the year 755,527 271,660 (114,722) (496,791) (52,114) (177,804) 51,772 210,096 516,496 (134,292) 829,828

Assets and liabilities Cash and cash equivalents 169,752 505,273 95,705 1,057,205 2,495,611 85,421 25,776 78,629 1,565,231 – 6,078,603 Other assets 12,318,066 4,583,654 1,837,470 3,163,011 4,908,611 5,856,343 514,277 4,375,487 43,044 (4,753,085) 32,846,878 Segment assets as at 31 December 2017 12,487,818 5,088,927 1,933,175 4,220,216 7,404,222 5,941,764 540,053 4,454,116 1,608,275 (4,753,085) 38,925,481

Loans and borrowings 9,434 318 347,229 1,895,445 – 3,421,866 182 1,963,566 – – 7,638,040 Other liabilities 4,830,012 536,655 2,198,383 420,431 329,442 1,349,860 140,131 324,762 10,120 (4,753,085) 5,386,711 Segment liabilities as at 31 December 2017 4,839,446 536,973 2,545,612 2,315,876 329,442 4,771,726 140,313 2,288,328 10,120 (4,753,085) 13,024,751

1 Parkway Pantai Group, per the corporate structure, comprises the “Parkway Pantai” and “PLife REIT” segments. 2 “PPL Others” comprises mainly Parkway Pantai’s hospital in Brunei, corporate office as well as other investment holding entities within Parkway Pantai. 3 “CEEMENA” refers to Central and Eastern Europe, Middle East and North Africa. 4 Others comprises mainly the Group’s corporate office as well as other investment holding entities.

240 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

36. SEGMENT REPORTING (continued) Acibadem IMU Parkway Pantai (1) Holdings Health Singapore Malaysia India North Asia PPL Others (2) CEEMENA (3) Malaysia PLife REIT (1) Others(4) Eliminations Total 2017 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Revenue and expenses Revenue from external customers 3,848,308 1,836,415 708,596 332,658 176,615 3,853,527 250,386 134,006 2,128 – 11,142,639 Inter-segment revenue 106,377 1,000 – – 1,138 – 3,875 208,311 60,075 (380,776) – Total segment revenue 3,954,685 1,837,415 708,596 332,658 177,753 3,853,527 254,261 342,317 62,203 (380,776) 11,142,639

EBITDA 1,135,100 513,755 13,696 (251,954) 12,722 617,888 80,645 282,684 9,236 (134,292) 2,279,480

241 Financial Statements Notes to the Financial Statements

36. SEGMENT REPORTING (continued) Geographical segment In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of operations. Segment assets are based on the geographical location of the assets.

Other Elimina- Singapore Malaysia North Asia India Japan CEEMENA regions Others (1) tions Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2018 Revenue from external customers 3,888,843 2,277,686 499,624 851,268 132,857 3,676,198 190,817 3,639 – 11,520,932 Inter-segment revenue – – – – – – – 2,529,534 (2,529,534) – Total segment revenue 3,888,843 2,277,686 499,624 851,268 132,857 3,676,198 190,817 2,533,173 (2,529,534) 11,520,932

Non-current assets(2) 14,154,746 4,725,583 3,084,320 4,558,805 2,106,266 4,192,607 48,016 1,429 – 32,871,772

2017 Revenue from external customers 3,848,308 2,086,801 332,658 708,596 134,006 3,853,527 164,881 13,862 – 11,142,639 Inter-segment revenue – – – – – – – 60,000 (60,000) – Total segment revenue 3,848,308 2,086,801 332,658 708,596 134,006 3,853,527 164,881 73,862 (60,000) 11,142,639

Non-current assets(2) 14,269,735 4,518,716 3,077,337 1,468,853 1,943,002 4,923,480 54,668 3,086 – 30,258,877

1 Others include balances relating to corporate offices, which is unallocated. 2 Non-current assets consist of property, plant and equipment, prepaid lease payments, investment properties, goodwill and intangible assets.

37. FINANCIAL INSTRUMENTS (i) Categories of financial instruments The table below provides an analysis of financial instruments as at 31 December 2018 categorised as follows:

(a) Fair value through profit or loss (“FVTPL”); • Mandatorily required by MFRS 9

(b) Amortised cost (“AC”);

(c) Fair value through other comprehensive income (“FVOCI”); and • Equity instruments designated upon initial recognition (“EIDUIR”)

(d) Fair value of derivatives used for hedging

242 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

37. FINANCIAL INSTRUMENTS (continued) (i) Categories of financial instruments Derivatives Carrying Mandatorily FVOCI used for amount AC at FVTPL – EIDUIR hedging 2018 RM’000 RM’000 RM’000 RM’000 RM’000 Financial assets Group Amount due from a joint venture 19,602 19,602 – – – Investment in NCDs of an associate 274,280 274,280 – – – Other financial assets –– Unquoted shares 11,334 – – 11,334 – –– Mutual funds 4,257 – 4,257 – – –– Money market funds 179,646 – 179,646 – – –– Fixed deposits 170,285 170,285 – – – –– Trade and other receivables (1) 1,949,248 1,949,248 – – – Derivative assets –– Foreign exchange forward contracts 6,281 – 6,281 – – –– Put option 3,756 – 3,756 – – Cash and cash equivalents 7,763,398 7,763,398 – – – 10,382,087 10,176,813 193,940 11,334 –

Company Money market funds 179,646 – 179,646 – – Trade and other receivables (1) 2,863 2,863 – – – Amount due from subsidiaries 2,546,875 2,546,875 – – – Cash and cash equivalents 1,280,302 1,280,302 – – – 4,009,686 3,830,040 179,646 – –

Financial liabilities Group Trade and other payables (2) (2,896,995) (2,896,995) – – – Loans and borrowings (10,454,050) (10,454,050) – – – Bank overdrafts (81,215) (81,215) – – – Derivative liabilities –– Interest rate swaps (3,091) – – – (3,091) –– Cross currency interest swaps (9,191) – – – (9,191) –– Call option granted to NCI (4,861) – (4,861) – – –– Foreign exchange forward contracts (956) – (956) – – (13,450,359) (13,432,260) (5,817) – (12,282)

Company Trade and other payables (2) (11,367) (11,367) – – – Amounts due to subsidiaries (78,589) (78,589) – – – (89,956) (89,956) – – –

1 Excludes prepayments 2 Excludes deposits, rental advance billings, put option liabilities and contract liabilities

243 Financial Statements Notes to the Financial Statements

37. FINANCIAL INSTRUMENTS (continued) (i) Categories of financial instruments (continued) The table below provides an analysis of financial instruments as at 31 December 2017 categorised as follows:

(a) Loans and receivables (“L&R”); (b) Available-for-sale financial instruments (“AFS”); (c) Financial liabilities measured at amortised cost (“FL”); (d) Fair value through profit or loss (“FVTPL”); and (e) Fair value of derivatives used for hedging

Derivatives Carrying used for amount L&R/(FL) AFS FVTPL hedging 2017 RM’000 RM’000 RM’000 RM’000 RM’000 Financial assets Group Amount due from a joint venture 19,710 19,710 – – – Other financial assets –– Available-for-sale equity instruments 11,385 – 11,385 – – –– Fixed deposits 163,558 163,558 – – – –– Trade and other receivables(1) 1,429,526 1,429,526 – – – Derivative assets –– Foreign exchange forward contracts 19,167 – – 19,167 – –– Cross currency interest swap 5,036 – – – 5,036 –– Put option 1,625 1,625 – – – Cash and cash equivalents 6,078,603 6,078,603 – – – 7,728,610 7,693,022 11,385 19,167 5,036

Company Trade and other receivables(1) 2,266 2,266 – – – Amounts due from subsidiaries 14,848 14,848 – – – Cash and cash equivalents 1,564,893 1,564,893 – – – 1,582,007 1,582,007 – – –

Financial liabilities Group Trade and other payables(2) (2,458,444) (2,458,444) – – – CCPS liabilities (93,185) – – (93,185) – Loans and borrowings (7,638,040) (7,638,040) – – – Bank overdrafts (68) (68) – – – Derivative liabilities –– Interest rate swaps (4,240) – – – (4,240) –– Call option granted to NCI (22,493) – – (22,493) – (10,216,470) (10,096,552) – (115,678) (4,240)

Company Trade and other payables(2) (7,605) (7,605) – – – Amounts due to subsidiaries (814) (814) – – – (8,419) (8,419) – – –

1 Excludes prepayments 2 Excludes deposits, rental advance billings, put option liabilities, contract liabilities and CCPS liabilities

244 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

37. FINANCIAL INSTRUMENTS (continued) Net gains/(losses) arising from financial instruments Group Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Mandatorily at FVTPL financial instruments –– fair value changes recognised in profit or loss 273 (13,753) 235 – –– dividend income 3,639 – 3,639 – Financial assets at amortised cost 149,254 – 25,491 – Financial liabilities at amortised cost (966,874) (724,184) (2,042) – AFS financial instruments –– recognised in other comprehensive income – (319,205) – – –– dividend income – 2,128 – – –– gain on disposals – 559,195 – – Loans and receivables – 39,639 – 18,689 Derivative liabilities –– recognised in other comprehensive income (11,873) 24,971 – – –– recognised in profit or loss 34,670 16,693 – – (790,911) (414,516) 27,323 18,689

(ii) Financial risk management The Group and the Company have exposures to the following risks from their financial instruments:

• Credit risk • Liquidity risk • Market risk

(iii) Credit risk Credit risk is the risk of a financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group’s primary exposure to credit risk, arises principally through its trade receivables and investment in debt securities. The Company’s exposure to credit risk arises principally from its amounts due from subsidiaries and financial guarantee provided to a bank for credit facilities granted to a subsidiary. There are no significant changes as compared to prior periods.

Trade receivables Risk management objectives, policies and processes for managing the risk The Group has a credit policy in place and the exposure to credit risk is monitored on an on-going basis. Credit evaluations are performed on major customers requiring credit over a certain amount. For the hospital operations, the Group does not grant credit to self-pay customers. Instead, a self-pay customer is requested to place an initial deposit at the time of admission to the hospital. Additional deposit is requested from the customer when the hospital charges exceed a certain level.

At the end of each reporting date, the Group assesses whether any of the trade receivables are credit impaired.

The gross carrying amounts of credit impaired trade receivables are written off (either partially or fully) when there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have the assets or sources of income that could generate sufficient cash flows to repay the amount subject to the write-off. Nevertheless, trade receivables that are written off could still be subject to enforcement activities.

245 Financial Statements Notes to the Financial Statements

37. FINANCIAL INSTRUMENTS (continued) (iii) Credit risk (continued) Trade receivables (continued) Exposure to credit risk, credit quality and collateral As the Group does not require any collateral in respect of its financial assets, the maximum exposures to credit risk are represented by the carrying amounts of financial assets in the statements of financial position.

Credit risk concentration profile The exposure to credit risk for trade receivables at the date of reporting (by geographical distribution) are as follows:

Group 2018 2017 Note RM’000 RM’000 Malaysia 449,361 263,744 Singapore 283,008 371,389 India 608,523 74,738 North Asia 49,576 47,438 Middle East 30,239 76,901 South East Asia 106,511 86,469 CEEMENA 543,290 602,342 Others 15,647 4,987 2,086,155 1,528,008 Impairment losses (386,380) (252,845) 14 1,699,775 1,275,163

At 31 December 2018, the Group has no outstanding trade receivables from significant customers (2017: two significant customers amounting to RM201,467,000 for which allowance for impairment of RM32,687,000 has been recognised).

Recognition and measurement of impairment losses The Group uses a provision matrix to measure the lifetime expected credit loss allowance for trade receivables. In measuring the expected credit losses, trade receivables are grouped based on shared credit risk characteristics such as customer types, geographic region, and days past due. Customer types include self-pay customers, insurers, third party administrators, government bodies etc.

Loss rate is calculated using a “roll-rate” method based on the probability of a receivable progressing through successive stages of delinquency to being written off.

In calculating the expected credit loss rates, the Group considers historical loss rates for each category of customers, based on actual credit loss experience over the past four years. This is adjusted by scalar factors to reflect differences between economic conditions during the period over which the historic data has been collected, current conditions and the Group’s view of economic conditions over the expected lives of the receivables. The scalar factors for self-pay customers are based on actual and forecast real income growth rates of respective countries. The scalar factors for corporate and government customers are based on default probability risk rates of the customer.

246 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

37. FINANCIAL INSTRUMENTS (continued) (iii) Credit risk (continued) Trade receivables (continued) Recognition and measurement of impairment losses (continued) The following table provides information about the exposure to credit risk and ECLs for trade receivables as at 31 December 2018.

Gross carrying Impairment Net amount loss balance Group RM’000 RM’000 RM’000 Not credit impaired Not past due 769,828 (350) 769,478 Past due 1 – 30 days 315,340 (3,241) 312,099 Past due 31 – 180 days 431,600 (19,854) 411,746 Past due 181 days – 1 year 123,465 (43,405) 80,060 Past due more than 1 year 309,553 (258,078) 51,475 1,949,786 (324,928) 1,624,858

Credit impaired Individually impaired 136,369 (61,452) 74,917 2,086,155 (386,380) 1,699,775

The movements in the allowance for impairment in respect of trade receivables during the year are shown below.

Group RM’000 At 1 January 2018 per MFRS 9/MFRS 139 252,845 Additions through business combinations 197,186 Impairment loss reversed (35,037) Written off (8,799) Translation differences (19,815) At 31 December 2018 386,380

247 Financial Statements Notes to the Financial Statements

37. FINANCIAL INSTRUMENTS (continued) (iii) Credit risk (continued) Trade receivables (continued) Comparative information under MFRS 139, Financial instruments: Recognition and Measurement The aging of trade receivables as at 31 December 2017 was as follows:

Gross carrying Impairment Net amount loss balance Group RM’000 RM’000 RM’000 Not past due 766,414 (3,485) 762,929 Past due 1 – 30 days 237,539 (3,953) 233,586 Past due 31 – 180 days 258,795 (33,836) 224,959 Past due 181 days – 1 year 85,534 (48,275) 37,259 Past due more than 1 year 179,726 (163,296) 16,430 1,528,008 (252,845) 1,275,163

The movements in the allowance for impairment in respect of trade receivables during the year are shown below.

Group RM’000 At 1 January 2017 266,803 Impairment loss recognised 10,856 Written off (6,558) Translation differences (18,256) At 31 December 2017 252,845

The Group provides for impairment allowance in respect of trade receivables based on historical default rates. Specific impairment allowance is provided on a case-by-case basis depending on the circumstances.

The gross amount of the trade receivables which are individually assessed for impairment, and specific impairment allowance are made on a case-by-case basis are as follows:

Individually Specific assessed allowances balance made Net Group RM’000 RM’000 RM’000 2017 Trade receivables 250,872 (141,650) 109,222

Fixed deposits and cash and cash equivalents Cash and fixed deposits are placed with financial institutions which are regulated and with good credit ratings. As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.

The Group and the Company consider its fixed deposits and cash and cash equivalents to have low credit risk based on the external credit ratings of the counterparties. The amount of the allowance on fixed deposits and cash and cash equivalents was negligible.

248 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

37. FINANCIAL INSTRUMENTS (continued) (iii) Credit risk (continued) Amount due from subsidiaries Risk management objectives, policies and processes for managing the risk The Company provides unsecured advances to subsidiaries. The Company monitors the results of the subsidiaries regularly.

Exposure to credit risk, credit quality and collateral As at the end of the financial year, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.

Impairment losses The Company determines the probability of default from these receivables individually using internal information available. The Company considers these receivable balances as low credit risk unless there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly or the balance is overdue for more than 365 days. As at reporting date, the expected credit loss allowance on these low-credit-risk balances is insignificant.

Financial guarantees Risk management objectives, policies and processes for managing the risk Financial guarantees to banks in respect of banking facilities are granted by the Company and PHL, a wholly owned subsidiary.

The financial guarantees are granted by the Company and PHL for Integrated Healthcare Turkey Yatirimlari Limited (“IHTYL”), a wholly owned subsidiary, and KHPL, a 50% owned joint venture, based on the Company’s and Group’s shareholding interests in these borrowing entities. The Group monitors on an ongoing basis the results of and repayments made by the borrowing entities.

Exposure to credit risk, credit quality and collateral Group The maximum exposure of the Group in respect of financial guarantee (Note 25) at the reporting date amounted to RM39,739,000 (2017: RM35,273,000) representing the Group’s share of amount drawn down by KHPL.

On 5 January 2017, the bank served a notice to KHPL that an Event of Default has occurred. In view that KHPL is unlikely to be able to repay the loan, the Group had made a provision for its 50% share of the amounts that KHPL owes the bank (Note 25).

Company The maximum exposure of the Company in respect of financial guarantee at the reporting date amounted to RM664,003,000 (2017: RM669,360,000) representing the outstanding bank loans of IHTYL.

At the reporting date, the Company does not consider it probable that a claim will be made against the Company under the financial guarantee.

The financial guarantee is not recognised since the fair value on initial recognition was not material.

(iv) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s exposure to liquidity risk arises principally from its payables and loans and borrowings.

The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows. The Group ensures that it has sufficient cash and available undrawn credit facilities to meet expected operational expenses, including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

249 Financial Statements Notes to the Financial Statements

37. FINANCIAL INSTRUMENTS (continued) (iv) Liquidity risk (continued) Maturity analysis The following table provides the maturity profile of the Group’s and the Company’s financial liabilities as at the end of the financial year. The amounts are gross and undiscounted, and include contractual interest payments and exclude the impact of netting arrangements:

After 1 year Carrying Contractual Within but within After amount cash flows 1 year 5 years 5 years Group RM’000 RM’000 RM’000 RM’000 RM’000 2018 Non-derivative financial liabilities Loans and borrowings 10,454,050 11,762,370 1,416,756 9,173,881 1,171,733 Bank overdrafts 81,215 81,215 81,215 – – Trade and other payables* 4,171,213 4,179,266 3,553,999 413,012 212,255 14,706,478 16,022,851 5,051,970 9,586,893 1,383,988

Derivative financial instruments Foreign exchange forward contracts (gross-settled) –– inflows (272,590) (278,318) (173,432) (104,886) – –– outflows 267,265 272,974 168,194 104,780 – Cross currency interest rate swaps (gross-settled) –– inflows (4,738) (4,889) (2,563) (2,326) – –– outflows 13,929 14,372 7,534 6,838 – Interest rate swaps (net-settled) 3,091 3,189 2,013 1,149 27 6,957 7,328 1,746 5,555 27 14,713,435 16,030,179 5,053,716 9,592,448 1,384,015

2017 Non-derivative financial liabilities Loans and borrowings 7,638,040 9,130,871 814,755 7,103,245 1,212,871 Bank overdrafts 68 68 68 – – Trade and other payables* 3,456,753 3,463,071 2,560,539 781,446 121,086 11,094,861 12,594,010 3,375,362 7,884,691 1,333,957

Derivative financial instruments Foreign exchange forward contracts (gross-settled) –– inflows (416,119) (422,659) (290,409) (132,250) – –– outflows 396,952 403,302 274,818 128,484 – Cross currency interest rate swaps (gross-settled) –– inflows (13,156) (13,576) (4,625) (8,951) – –– outflows 8,120 8,379 2,855 5,524 – Interest rate swaps (net-settled) 4,240 4,378 2,926 1,452 – (19,963) (20,176) (14,435) (5,741) – 11,074,898 12,573,834 3,360,927 7,878,950 1,333,957

* Excludes deposits, rental advance billings, contract liabilities and CCPS liabilities

250 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

37. FINANCIAL INSTRUMENTS (continued) (iv) Liquidity risk (continued) Maturity analysis (continued) After 1 year Carrying Contractual Within but within After amount cash flows 1 year 5 years 5 years Company RM’000 RM’000 RM’000 RM’000 RM’000 2018 Non-derivative financial liabilities Amounts due to subsidiaries 78,589 78,589 78,589 – – Trade and other payables # 11,367 11,367 11,367 – – 89,956 89,956 89,956 – –

2017 Non-derivative financial liabilities Amounts due to subsidiaries 814 814 814 – – Trade and other payables # 7,605 7,605 7,605 – – 8,419 8,419 8,419 – –

# Excludes deposits and rental advance billings

(v) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s financial position or cash flows.

(a) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Group is exposed to foreign exchange risk on sales, purchases, cash and cash equivalents, receivables and payables, and loans and borrowings that are denominated in a currency other than the respective functional currencies of Group entities. The currencies giving rise to this risk are primarily the Singapore Dollar, United States Dollar, Euro, Japanese Yen, Chinese Renminbi and India Rupee.

Risk management objectives, policies and processes for managing the risk The Group uses foreign exchange forward contracts to manage its exposure to foreign currency movements on its net income denominated in Japanese Yen from its investment in Japan. Where necessary, the foreign exchange forward contracts are rolled over at maturity.

The Group actively monitors its foreign currency risk and minimises such risk by borrowing in the functional currency of the borrowing entity or by borrowing in the same currency as the foreign investment (i.e. natural hedge of net investments).

The Group also enters in cross currency interest rate swaps to realign borrowings to the same currency of the Group’s foreign investments to achieve a natural hedge (See Note 37(vi)).

In respect of other monetary assets and liabilities held in currencies other than the functional currencies, the Group ensures that the net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rate where necessary to address short term imbalances.

The nominal value and fair value of the foreign exchange forward contracts and cross currency interest rate swaps is disclosed in Note 26.

251 Financial Statements Notes to the Financial Statements

37. FINANCIAL INSTRUMENTS (continued) (v) Market risk (continued) (a) Foreign currency risk (continued) Exposure to foreign currency risk The Group’s exposure to foreign currency (a currency which is other than the functional currencies of the Group entities) risk are as follows:

Singapore United States Japanese Chinese Dollar Dollar Euro Yen India Rupee Renminbi Others* Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2018 Carrying value Trade and other receivables 1,037 18,178 2,700 – 17,708 – 6,703 Intra-group receivables 2,544,330 126,563 – – 3,937 417 1,307 Cash and cash equivalents 60,048 1,269,047 5,716 818 – 220,234 2,666 Loans and borrowings (19,811) (525,423) (2,023,337) – – – (626) Trade and other payables (141,028) (111,186) (4,618) (1,754) – (27,601) (1,383) Intra-group payables (1,029,486) (125,935) – – – (1,353) (24,048) Put options granted to non-controlling interests – – (224,272) – (362,967) – – Call option granted to non-controlling interests – – – – (4,862) – – 1,415,090 651,244 (2,243,811) (936) (346,184) 191,697 (15,381)

Off balance sheet derivative net assets/liabilities Foreign exchange forward contracts – 32,017 55,028 (180,061) – – – 1,415,090 683,261 (2,188,783) (180,997) (346,184) 191,697 (15,381)

2017 Carrying value Trade and other receivables – 8,133 3,247 – 1,134 – 155 Intra-group receivables 22,148 1,648 – – 23,699 – 330 Cash and cash equivalents 2,055 2,908,230 28,840 14,702 – 222,929 2,927 Loans and borrowings – (495,400) (1,739,258) – – – – Trade and other payables (13,922) (87,816) (15,561) (1,776) – (28,319) (507) Intra-group payables (49,612) (957) – – – (1,281) (15,768) Put options granted to non-controlling interests – – (311,281) – (664,943) – – Call option granted to non-controlling interests – – – – (22,493) – – (39,331) 2,333,838 (2,034,013) 12,926 (662,603) 193,329 (12,863)

Off balance sheet derivative net assets/liabilities Foreign exchange forward contracts – – 203,106 (198,933) – – – (39,331) 2,333,838 (1,830,907) (186,007) (662,603) 193,329 (12,863)

* Others include mainly British Pound, Hong Kong Dollar, Malaysian Ringgit, Swiss Franc, Australian Dollar, and Bangladeshi Taka.

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37. FINANCIAL INSTRUMENTS (continued) (v) Market risk (continued) (a) Foreign currency risk (continued) Exposure to foreign currency risk (continued) Singapore Malaysian United States Dollar Ringgit Dollar Company RM’000 RM’000 RM’000 2018 Cash and cash equivalents 615 – 1,209,438 Amounts due from/(to) subsidiaries 2,536,971 (7,027) 227 Trade and other payables (152) – (3,508) 2,537,434 (7,027) 1,206,157

2017 Cash and cash equivalents 189 – 1,182,977 Amounts due from/(to) subsidiaries 14,706 (12,567) – Trade and other payables (354) – – 14,541 (12,567) 1,182,977

Sensitivity analysis A 10% strengthening of the following currencies against the respective functional currencies of the Group entities at the end of the financial year would have increased/(decreased) profit or loss before tax by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remained constant and ignores any impact of forecasted sales and purchases.

2018 2017 Equity Profit or loss Equity Profit or loss Group RM’000 RM’000 RM’000 RM’000 Singapore Dollar – 141,509 – (3,933) United States Dollar – 68,326 – 233,384 Euro (22,427) (196,451) (31,128) (151,963) Japanese Yen –– Foreign exchange forward contracts – (18,006) – (19,893) –– Non-derivative financial assets and liabilities – (94) – 1,293 India Rupee (36,297) 1,678 (66,494) 232 Chinese Renminbi – 19,170 – 19,333 Others* – (1,538) – (1,286) (58,724) 14,594 (97,622) 77,167

* Others include mainly British Pound, Malaysian Ringgit, Swiss Franc, Australian Dollar, and Bangladeshi Taka.

253 Financial Statements Notes to the Financial Statements

37. FINANCIAL INSTRUMENTS (continued) (v) Market risk (continued) (a) Foreign currency risk (continued) Sensitivity analysis (continued) 2018 2017 Equity Profit or loss Equity Profit or loss Company RM’000 RM’000 RM’000 RM’000 Singapore Dollar – 253,743 – 1,454 Malaysian Ringgit – (703) – (1,257) United States Dollar – 120,616 – 118,298 – 373,656 – 118,495

The foreign currency risk associated with the Japanese denominated outstanding forward foreign exchange contracts as at 31 December 2018 would have no significant impact to the Group as the Group would have a corresponding gain in its net future income from Japan as a result of the weakening of Malaysian Ringgit.

A 10% weakening of the above currencies against the respective functional currencies of the Group entities at the end of the financial year would have an equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remained constant.

(b) Interest rate risk This relates to changes in interest rates which affect mainly the Group’s fixed deposits and its loans and borrowings. The Group’s fixed-rate financial assets and loans and borrowings are exposed to a risk of change in their fair value while the variable-rate financial assets and borrowings are exposed to a risk of change in cash flows. Short term receivables and payables are not significantly exposed to interest rate risk.

The Group has no significant concentration of interest rate risk that may arise from exposure to Group’s fixed deposits and its obligations with banks and financial institutions.

Risk management objectives, policies and processes for managing the risk The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debts as well as by rolling over its fixed deposits and variable rate borrowings on a short-term basis. In respect of long-term borrowings, the Group may enter into interest rate derivatives to manage its exposure to adverse movements in interest rates.

Interest rate swaps have been entered into to achieve an appropriate mix of fixed and floating rate exposures within the Group’s policy (See Note 36(vi)).

The nominal value and fair value of the interest rate swaps is disclosed in Note 26.

254 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

37. FINANCIAL INSTRUMENTS (continued) (v) Market risk (continued) (b) Interest rate risk (continued) Exposure to interest rate risk The interest rate profile of the Group’s and the Company’s significant interest-bearing financial instruments, based on carrying amounts as at the end of the financial year are as follows:

Group Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Fixed rate instruments Investment in NCDs 274,280 – – – Fixed deposits 3,767,556 1,355,340 52,388 275,973 Amount due to a subsidiary – – (77,023) – Fixed rate medium term notes (444,537) (301,007) – – Debt component of CCD (247,657) – – – Finance lease liabilities (183,238) (133,407) – – Other loans and borrowings (171,706) (143,944) – –

Variable rate instruments Cash and bank balances 1,203,480 3,333,110 1,203,480 1,182,936 Loans and borrowings (9,406,912) (7,054,298) – – Bank overdrafts (81,215) (68) – – Finance lease liabilities – (5,384) – – Financial guarantee provision (39,739) (35,273) – – Interest rate swaps (3,091) (4,240) – – Cross currency interest rate swaps (9,191) 5,036 – –

Sensitivity analysis Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rates at the end of the financial year would not affect profit or loss.

255 Financial Statements Notes to the Financial Statements

37. FINANCIAL INSTRUMENTS (continued) (v) Market risk (continued) (b) Interest rate risk (continued) Sensitivity analysis Cash flow sensitivity analysis for variable rate instruments A change of 100 basis points (“bp”) in interest rates at the reporting date would increase/(decrease) amounts charged or credited to assets, profit or loss or equity as shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

Equity Profit or loss 100bp 100bp 100bp 100bp increase decrease increase decrease RM’000 RM’000 RM’000 RM’000 Group 2018 Interest rate swaps 15,312 (8,489) 10,404 (10,404) Cross currency interest rate swaps 7,853 (8,042) 3,807 (3,807) Other variable rate instruments – – (83,228) 83,228 23,165 (16,531) (69,017) 69,017

2017 Interest rate swaps 12,501 (15,567) 10,238 (10,238) Cross currency interest rate swaps 11,119 (11,363) 3,828 (3,828) Other variable rate instruments – – (37,709) 37,709 23,620 (26,930) (23,643) 23,643

Company 2018 Other variable rate instruments – – 12,035 (12,035)

2017 Other variable rate instruments – – 11,829 (11,829)

(vi) Hedging activities Cash flow hedge The Group manages its exposure to interest rate movements on certain floating rate loans and borrowings by entering into interest rate swaps, where appropriate. As at 31 December 2018, the Group has interest rate swaps with a total notional amount of RM1,040,480,000 (2017: RM1,023,701,000) to provide fixed rate funding up to 2024 (2017: up to 2020) at a weighted average effective interest rate of 0.25% (2017: 0.34%) per annum.

Also, the Group has cross currency interest rate swaps (“CCIRS”) with notional amount of RM380,626,000 (2017: RM382,719,000) as at 31 December 2018 to manage its foreign currency risk and interest rate risk arising from the financing of Japanese properties using Singapore dollar facilities. To maintain a natural hedge, the Group utilised CCIRS to realign the Singapore dollar denominated loans back into effective Japanese Yen denominated loans to match its underlying Japanese Yen denominated assets.

As at 31 December 2018, where the interest rate swaps and cross currency interest rate swaps were designated as hedging instruments in qualifying cash flow hedges, the effective portion of the changes in fair value of the swaps amounting to RM2,571,000 gain (2017: RM731,000 gain) was recognised in other comprehensive income (see Note 31).

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37. FINANCIAL INSTRUMENTS (continued) (vi) Hedging activities (continued) Cash flow hedge (continued) During the year, where hedge accounting was discontinued, not practised or ineffective, the changes in fair value of interest rate swaps amounting to RM971,000 loss (2017: RM815,000 loss) was charged to profit or loss. Accordingly, the changes in fair value of these interest rate swaps, previously recognised in the hedge reserve amounting to RM1,678,000 loss (2017: RM2,429,000 loss) were reclassified to profit or loss.

At 31 December 2018, the Group held the following instruments to hedge exposures to changes in foreign currency and interest rates.

Maturity Within More than 1 year 1 year RM’000 RM’000 Interest rate risk Cross currency interest rate swaps Net exposure (RM’000) – 380,626 Average fixed interest rate – 0.75%

Interest rate swaps Net exposure (RM’000) 442,238 598,242 Average fixed interest rate 0.31% 0.20%

The amounts at the reporting date relating to items designated as hedged items were as follows:

2018 Balances remaining in the hedge reserve from hedging relationships Change in for which value used for hedge calculating accounting is hedge Hedge no longer ineffectiveness reserve applied RM’000 RM’000 RM’000 Interest rate risk Variable-rate instruments 23,074 16,715 407

257 Financial Statements Notes to the Financial Statements

37. FINANCIAL INSTRUMENTS (continued) (vi) Hedging activities (continued) Cash flow hedge (continued) The following table provides a reconciliation by risk category of components of equity and analysis of OCI items resulting from cash flow hedge accounting.

2018 Hedge reserve RM’000 Cash flow hedges At 1 January 15,200 Changes in fair value 2,571 Hedge ineffectiveness recognised in profit or loss 1,678 4,249 OCI attributed to NCI (2,735) Changes in ownership interest in subsidiaries with no change in control 1 At 31 December 16,715

The amounts relating to items designated as hedging instruments were as follows:

2018 Line item in the statement of Changes in the Carrying amount financial position where value of the Line item in hedging Hedge profit or loss the hedging the hedged instrument ineffectiveness that includes Nominal instrument is item is recognised recognised in hedge amount Assets Liabilities included included in OCI profit or loss ineffectiveness Interest rate risk RM’000 RM’000 RM’000 RM’000 RM’000

Cross currency Financial Loans and Finance interest rate swaps 380,626 – (9,191) derivatives borrowings 2,171 – costs Financial Loans and Finance Interest rate swaps 1,040,480 – (3,091) derivatives borrowings 400 1,678 costs 2,571 1,678

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37. FINANCIAL INSTRUMENTS (continued) (vi) Hedging activities (continued) Cash flow hedge (continued) Hedge of net investments in foreign operations The Group’s Japanese Yen denominated unsecured bank loans has been designated as a natural hedge of the Group’s net investments in Japan. In 2014, the Group refinanced a Japanese Yen denominated loan with a Singapore Dollar denominated loan which was overlaid with a cross currency interest rate swaps to realign this SGD borrowing into an effective Japanese Yen loan to maintain as a natural hedge for its foreign investment in Japan. The carrying value of these Japanese denominated loan and Japanese medium term notes as at end of financial year was RM1,481,993,000 (2017: RM1,380,933,000).

The amounts related to items designated as hedging instruments were as follows:

2018 Carrying amount Changes in the value of the Line item in Line item in the statement hedging Hedge profit or loss of financial position instrument ineffectiveness that includes Nominal where the hedging recognised recognised in hedge amount Assets Liabilities instrument is included in OCI profit or loss ineffectiveness Interest rate risk RM’000 RM’000 RM’000 RM’000 RM’000

Foreign exchange denominated loans and borrowings 1,865,984 – (1,861,785) Loans and borrowings (78,542) – Not applicable

2018 Balances remaining in the exchange fluctuation reserve from hedging relationships Change in for which value used for hedge calculating Exchange accounting is hedge fluctuation no longer ineffectiveness reserve applied RM’000 RM’000 RM’000 JPY net investment 46,414 (85,518) –

259 Financial Statements Notes to the Financial Statements

37. FINANCIAL INSTRUMENTS (continued) (vii) Fair value information The carrying amounts of cash and cash equivalents, short term receivables and payables reasonably approximate their fair values due to the relatively short term of nature of these financial instruments.

The carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy are as follows. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

Fair value of financial instruments carried at fair value Total fair Carrying Level 1 Level 2 Level 3 Total value amount Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2018 Financial assets FVOCI unquoted shares 10 – – 11,334 11,334 11,334 11,334 FVTPL money market funds 10 – 179,646 – 179,646 179,646 179,646 FVTPL mutual funds 10 – 4,257 – 4,257 4,257 4,257 Foreign exchange forward contracts 26 – 6,281 – 6,281 6,281 6,281 Put option 26 – – 3,756 3,756 3,756 3,756 – 190,184 15,090 205,274 205,274 205,274

Financial liabilities Put options granted to NCI 25 – – (1,274,218) (1,274,218) (1,274,218) (1,274,218) Interest rate swaps 26 – (3,091) – (3,091) (3,091) (3,091) Foreign exchange forward contracts 26 – (956) – (956) (956) (956) Cross currency interest rate swaps 26 – (9,191) – (9,191) (9,191) (9,191) Call option granted to NCI 26 – – (4,861) (4,861) (4,861) (4,861) – (13,238) (1,279,079) (1,292,317) (1,292,317) (1,292,317)

2017 Financial assets Foreign exchange forward contracts 26 – 19,167 – 19,167 19,167 19,167 Cross currency interest rate swaps 26 – 5,036 – 5,036 5,036 5,036 – 24,203 – 24,203 24,203 24,203

Financial liabilities CCPS liabilities 25 – – (93,185) (93,185) (93,185) (93,185) Put options granted to NCI 25 – – (998,309) (998,309) (998,309) (998,309) Interest rate swaps 26 – (4,240) – (4,240) (4,240) (4,240) Call option granted to NCI 26 – – (22,493) (22,493) (22,493) (22,493) – (4,240) (1,113,987) (1,118,227) (1,118,227) (1,118,227)

260 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

37. FINANCIAL INSTRUMENTS (continued) (vii) Fair value information (continued) Fair value of financial instruments carried at fair value Total fair Carrying Level 1 Level 2 Level 3 Total value amount Company Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2018 Financial assets Other financial assets –– FVTPL money market funds 10 – 179,646 – 179,646 179,646 179,646

Policy on transfer between levels The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer.

Level 2 fair value Level 2 fair value is estimated using inputs other than quoted that are observable for the financial assets or liabilities either directly or indirectly.

Derivatives, money market funds and mutual funds The fair value of foreign exchange forward contracts, cross currency interest rate swaps, interest rate swaps, money market funds and mutual funds are based on banker quotes.

Transfer between Level 1 and Level 2 fair values There has been no transfer between Level 1 and Level 2 fair values during the financial year (2017: no transfer in either direction).

Level 3 fair value The following table shows a reconciliation of level 3 fair values:

Call option FVOCI Put options granted Put unquoted CCPS granted to NCI option shares liabilities to NCI RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2017 (18,128) – – (82,645) (864,608) Arising from business combination – – – – (22,426) Granted to non-controlling interests – – – – (139,014) Reclassification to equity – – – – (45,229) Change in fair value (4,753) – – (13,753) – Translation differences 388 – – 3,213 72,968 At 31 December 2017/1 January 2018 (22,493) – – (93,185) (998,309)

Reclassification on application of MFRS 9 – 1,625 11,385 – – Arising from business combination – – – – (667,285) Reclassification to equity – – – 85,460 – Change in fair value 17,202 2,102 – – 296,334 Translation differences 430 29 (51) 7,725 95,042 At 31 December 2018 (4,861) 3,756 11,334 – (1,274,218)

261 Financial Statements Notes to the Financial Statements

37. FINANCIAL INSTRUMENTS (continued) (vii) Fair value information (continued) Measurement of fair values The carrying amounts of financial assets and financial liabilities with a maturity of less than one year (including trade and other receivables, other financial assets, cash and cash equivalents, bank overdrafts and trade and other payables) are measured on the amortised cost basis and approximate their fair values due to their short-term nature and where the effect of discounting is immaterial.

Valuation techniques and significant unobservable inputs The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used.

(a) Financial instruments measured at fair value Inter-relationship between Significant significant unobservable inputs and Type Valuation technique unobservable inputs fair value measurement Group Interest rate Market comparison technique: Not applicable Not applicable swaps, foreign The fair values are based on exchange valuations provided by the financial forward institutions that are the counterparties contracts and to the transactions. These quotes are cross currency tested for reasonableness by interest rate discounting estimated future cash swaps flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the reporting date.

Call option Black Scholes model • Risk-adjusted The estimated fair value would granted to discount rate increase/(decrease) if the risk- non-controlling at 7.0% adjusted discount rates were interests (2017: 6.4%) lower/(higher).

• Dividend yield The estimated fair value would at nil% increase/(decrease) if the dividend (2017: nil%) yield were lower/(higher).

• Volatility The estimated fair value would at 31.2% increase/(decrease) if volatility (2017: 33.2%) were higher/(lower).

CCPS liabilities Discounted cash flows: The fair values Risk-adjusted The estimated fair value would and put options are based on the subsidiary’s equity discount rates at increase/(decrease) if the risk- granted to value computed mainly using the 13.25% to 15.25% adjusted discount rates were non-controlling discounted cash flow method based (2017: 13.3% to 15.0%) lower/(higher). interests on present value of projected free cash flows of the subsidiary discounted using a risk-adjusted discount rate. For put options granted to non-controlling interests, the expected payment is then discounted using a risk-adjusted discount rate.

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37. FINANCIAL INSTRUMENTS (continued) (vii) Fair value information (continued) Valuation techniques and significant unobservable inputs (continued) (b) Financial instruments not carried at fair value Type Valuation technique Group Unsecured fixed rate Market comparison: The fair value is estimated considering recent quoted medium term notes prices in markets that are not active.

Loans and borrowings, Discounted cash flows using a rate based on the current market rate of finance lease liabilities payables borrowing of the respective Group entities at the reporting date

38. CAPITAL MANAGEMENT The Group’s objectives when managing capital is to maintain a strong capital base and safeguard the Group’s ability to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Group monitors and maintains an optimal debt-to-equity ratio that complies with debt covenants and regulatory requirements.

Group 2018 2017 Note RM’000 RM’000 Loans and borrowings 21 10,454,050 7,638,040 Bank overdrafts 81,215 68 Less: Cash and cash equivalents 16 (7,763,398) (6,078,603) Net debt 2,771,867 1,559,505

Total equity 28,507,085 25,900,730

Debt-to-equity ratio 0.10 0.06

There were no changes in the Group’s approach to capital management during the financial year.

Except as disclosed in Note 21, the Group complies with all externally imposed capital requirements for the financial years ended 2018 and 2017.

263 Financial Statements Notes to the Financial Statements

39. OPERATING LEASES (i) Leases as lessee Group Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Non-cancellable operating lease payable: –– Within 1 year 270,542 231,212 1,018 18 –– After 1 year but within 5 years 901,629 792,984 1,272 42 –– After 5 years 1,737,826 2,056,475 – – 2,909,997 3,080,671 2,290 60

Land lease premium Based on the agreement between the Federal Government and the Group in 1994 for the use of Ministry of Health facilities, the agreement allows the Group to construct buildings in connection with the use of facilities for the training of students. The land was leased to the Group for a period of 30 years, commencing 1 January 1999.

In July 2012, the Group was informed by Pesuruhjaya Tanah Persekutuan (Federal Land Commission) that the lease premium from 1 January 1999 to 31 December 2013 amounted to RM2,800,000 and the Group had accordingly made payments.

The Group has accrued annual lease premium of RM116,000 for 2014 and RM420,000 for 2015, 2016, 2017 and 2018 respectively.

The Group is unable to ascertain the amount of the lease premium from 2019 to 2028 as the lease amount payable is yet to be determined as at date of these financial statements.

(ii) Leases as lessor The future minimum lease receivables under non-cancellable leases are as follows:

Group 2018 2017 RM’000 RM’000 Non-cancellable operating lease receivable: –– Within 1 year 208,761 195,640 –– After 1 year but within 5 years 642,896 606,365 –– After 5 years 700,513 774,659 1,552,170 1,576,664

40. CAPITAL AND OTHER COMMITMENTS Group 2018 2017 RM’000 RM’000 (a) Capital expenditure commitments Property, plant and equipment and investment properties –– Contracted but not provided for in these financial statements 887,340 1,083,580

(b) Joint venture Share of capital commitment of joint venture 128,285 137,291

264 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

40. CAPITAL AND OTHER COMMITMENTS (continued) (c) Other commitments Pursuant to the acquisition of 31.1% equity interest in Fortis, NTK is required to carry out the following subsequent to year ended 31 December 2018:

i. Mandatory Open Offer for acquisition of up to 26% of paid up equity Fortis shares at INR170 per share (“Fortis Open Offer”).

ii. Mandatory Open Offer for acquisition of up to 26% paid up equity shares of Fortis Malar Hospitals Limited (“Malar Open Offer”)

The maximum number of Fortis shares that Northern TK Venture Pte Ltd (“NTK”) will be acquiring will only be determined at a later date nearer to the start of the Fortis Open Offer. The maximum number of Fortis Malar Hospitals Limited shares, and the acquisition price per share, of the Malar Open Offer will only be determined at a later date nearer to the start of the Malar Open Offer.

In light of both open offers, an amount of RM1,970,800,000 was deposited in an escrow as described in Note 16.

On 14 December 2018, the Honorable Supreme Court of India had passed an order (“Order”) directing “status quo with regard to the sale of controlling stake in Fortis to Malaysian IHH Healthcare Berhad to be maintained”. In light of the Order, the Group is not able to proceed with the Fortis Open Offer for the time being until further order(s)/clarification(s)/direction(s) are issued by the Supreme Court of India and/or the Securities and Exchange Board of India. NTK is also not able to proceed with the Malar Open Offer as the Malar Open Offer is conditional upon the completion of the Fortis Open Offer.

41. RELATED PARTIES Related party transactions Other than disclosed elsewhere in the financial statements, transactions carried out on terms agreed with the related parties are as follows:

Group 2018 2017 RM’000 RM’000 With substantial shareholders and their related parties Sales and provision of services 316,677 348,005 Purchases and consumption of services (50,318) (54,706) Acquisition of approximately 15% equity interest in ASYH (Note 45(f)) (1,465,957) –

With key management personnel and their related parties Sales and provision of services 9,448 13,157 Purchases and consumption of services (64,461) (88,318) Acquisition of approximately 15% equity interest in ASYH (Note 45(f)) (1,465,957) –

With associates and joint ventures Sales and provision of services 10,689 9,454 Rental income 1,583 1,708 Purchases and consumption of services (15,928) (15,298)

With related corporations Consultancy fees rendered 792 340 Purchases and consumption of services (3,459) (3,512)

With director of a subsidiary Consultancy fees paid (140) (272)

265 Financial Statements Notes to the Financial Statements

41. RELATED PARTIES (continued) Related party transactions (continued) Company 2018 2017 RM’000 RM’000 With subsidiaries Share-based payment transactions 27,600 40,118

Significant related party balances related to the above transactions are as follows:

Group 2018 2017 RM’000 RM’000 Trade and other receivables Substantial shareholders and their related parties 12,251 46,161 Key management personnel and their related parties 1,137 4,302 13,388 50,463 Trade and other payables Substantial shareholders and their related parties (3,213) (3,907) Key management personnel and their related parties (4,802) (4,976) (8,015) (8,883)

These transactions have been entered into in the normal course of business and have been established under negotiated terms.

From time to time, directors and key management personnel of the Group, or their related parties, may receive services and purchase goods from the Group. These services and purchases are on negotiated basis.

42. ACQUISITION AND DISPOSAL OF BUSINESS Disposal of business in 2018 During the year, Parkway Healthcare (Hong Kong) Limited (“PHHK”) disposed of its panel network business for RM2,925,000. As no assets or liabilities were transferred during the sale, the Group recorded a gain of RM2,925,000 in the profit or loss.

Disposal of business in 2017 In July 2017, PHHK disposed of its aesthetic business for nil consideration.

Note RM’000 Property, plant and equipment 3 662 Inventories 296 Cash and cash equivalents 561 Trade and other payables (1,306) Fair value of net identifiable assets disposed 213

Cash consideration received – Fair value of net identifiable assets disposed (213) (213) Staff termination expenses paid (563) Loss on disposal of business 30 (776)

Staff termination expenses paid (563) Less: Cash and cash equivalents (net of bank overdrafts) disposed (561) Net cash out flows (1,124)

266 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

43. ACQUISITIONS OF SUBSIDIARIES Acquisitions of subsidiaries in 2018 (a) In March 2018, Medical Resources International Pte Ltd acquired 60% equity interest in Chengdu Shenton Health Clinic Co., Ltd (formerly known as Sincere Chengdu Clinic Co., Ltd) (“Chengdu Shenton Clinic”) from Beijing Yizhi Zhuoxin Corporate Management Information Co., Ltd for a total consideration of RMB12,000,000 (equivalent to RM7,418,000).

(b) In October 2018, Pantai Hospitals Sdn. Bhd. completed the acquisition of 9,500,000 ordinary shares in Amanjaya Specialist Centre Sdn. Bhd. (“Amanjaya”), representing a 100% equity interests therein, for a total cash consideration of RM104,762,000.

(c) In November 2018, NTK completed the subscription of 235,294,117 new equity shares of face value of Indian Rupee (“INR”) 10 each (“Fortis Shares”) in Fortis for a total cash consideration of INR39,999,999,980 (equivalent to RM2,383,160,000). Consequential thereto, NTK holds 31.1% of the equity interest of Fortis and obtained majority control of the Board of Fortis.

Fair value of consideration transferred The following summarises fair value of each major class of consideration transferred or payable at the acquisition date:

Chengdu Shenton Fortis Group Clinic Amanjaya (provisional) Total RM’000 RM’000 RM’000 RM’000 Cash and cash equivalents 7,418 104,762 2,383,160 2,495,340

Identifiable assets acquired and liabilities assumed The following summarises the recognised fair value of assets acquired and liabilities assumed at the date of acquisition:

Chengdu Shenton Fortis Group Clinic Amanjaya (provisional) Total Note RM’000 RM’000 RM’000 RM’000 Property, plant and equipment 3 5,052 54,000 1,741,564 1,800,616 Intangible assets 6 – – 57,065 57,065 Interests in associates – – 713,988 713,988 Interests in joint ventures – – 18,875 18,875 Deferred tax assets 11 – – 257,146 257,146 Inventories 1 723 36,626 37,350 Tax recoverable – – 245,506 245,506 Trade and other receivables 163 4,962 517,602 522,727 Other financial assets – – 89,838 89,838 Cash and cash equivalents 667 9,246 2,437,013 2,446,926 Trade and other payables (3,315) (3,505) (1,317,716) (1,324,536) Tax payable – (2) (5,246) (5,248) Employee benefits – – (66,439) (66,439) Bank overdrafts – – (130,563) (130,563) Loans and borrowings – (22,043) (1,012,847) (1,034,890) Deferred tax liabilities 11 – (5,956) (86,789) (92,745) Net identifiable assets acquired 2,568 37,425 3,495,623 3,535,616

267 Financial Statements Notes to the Financial Statements

43. ACQUISITIONS OF SUBSIDIARIES (continued) Measurement of fair values The valuation techniques used for measuring the fair value of material assets acquired in relation to the acquisitions of Chengdu Shenton Clinic and Amanjaya were as follows.

Assets acquired Valuation technique Property, plant and equipment Market comparison technique and cost technique: The valuation model considers market prices for similar items when they are available, and depreciated replacement cost when appropriate. Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence.

The fair value of Fortis Group’s identifiable assets acquired, liabilities assumed, non-controlling interests in the acquisition are provisional in view that the acquisition was completed close to the reporting date and the purchase price allocation exercise cannot be completed by then. As permitted by MFRS 3, Business Combinations, provisional fair values can used for a period of 12 months from the acquisition date to reflect the initial accounting for business combinations.

Net cash outflow arising from acquisitions of subsidiaries Chengdu Shenton Fortis Group Clinic Amanjaya (provisional) Total RM’000 RM’000 RM’000 RM’000 Purchase consideration settled in cash and cash equivalents 7,418 104,762 2,383,160 2,495,340 Less: Cash and cash equivalents acquired (667) (9,246) (2,306,450) (2,316,363) 6,751 95,516 76,710 178,977

Goodwill Chengdu Shenton Fortis Group Clinic Amanjaya (provisional) Total Note RM’000 RM’000 RM’000 RM’000 Fair value of consideration transferred 7,418 104,762 2,383,160 2,495,340 Fair value of net identified assets acquired (2,568) (37,425) (3,495,623) (3,535,616) Non-controlling interests, based on their proportionate interest in the net identifiable assets acquired 1,027 – 2,651,981 2,653,008 Goodwill 6 5,877 67,337 1,539,518 1,612,732

Goodwill comprises of expected synergies from integrating the operations of the Group and the acquiree, and expected upside potential from leveraging the Group’s international private healthcare experience to operate the acquiree. Goodwill also includes value for assets that are not separately identifiable.

Acquisition-related costs The Group incurred acquisition-related costs of approximately RM37,485,000 relating to external legal fees and due diligence costs. The legal fees and due diligence costs have been included in other operating expenses in the Group’s consolidated statement of profit or loss and other comprehensive income.

268 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

43. ACQUISITIONS OF SUBSIDIARIES (continued) Post-acquisition contributions to the Group Chengdu Shenton Fortis Group Clinic Amanjaya (provisional) Total RM’000 RM’000 RM’000 RM’000 Revenue 317 8,783 217,111 226,211 Net (loss)/profit (4,236) 2,184 10,572 8,520

If the above acquisitions had occurred on 1 January 2018, the Group would report a consolidated Group revenue of RM13,906,542,000 and a consolidated Group losses after tax of RM295,719,000 # for the financial year.

# Arrived at after taken into consideration mainly the impairment loss of inter-corporate deposits of Fortis, approximately INR4.5 billion, equivalent to RM261.2 million (see Note 50) and impairment of Fortis’ goodwill and investment totalled INR 5.5 billion, equivalent to RM322.9 million. Both impairments were recognised in profit or loss of Fortis prior to the acquisition by the Group on 13 November 2018.

Acquisitions of subsidiaries in 2017 (a) In May 2017, Acibadem Saglik Hizmetleri ve Ticaret A.S. (“ASH”) acquired 100% equity interest in ME-Dİ Sağlık Hizmetleri İthalat ve Ticaret A.Ş. (“ME-Di”) comprising 110,000 shares from Dilaver Özturan for a total consideration of TL6,500,000 (equivalent to RM7,874,000). The intended principal activity of ME-Di is the provision of outpatient medical services. ME-Di has merged with ASH on 27 December 2017.

(b) In July 2017, PPL subscribed for 5,104,849 ordinary shares in Angsana for a total consideration of SGD9,300,000 (equivalent to RM29,305,000) resulting in PPL holding 55% equity interest in Angsana and its subsidiaries.

Fair value of consideration transferred The following summarises fair value of each major class of consideration transferred or payable at the acquisition date:

ME-Di Angsana Total RM’000 RM’000 RM’000 Cash and cash equivalents 7,923 29,237 37,160

Identifiable assets acquired and liabilities assumed The following summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition:

ME-Di Angsana Total Note RM’000 RM’000 RM’000 Property, plant and equipment 3 – 6,372 6,372 Intangible assets 6 7,923 – 7,923 Deferred tax assets 11 – 2 2 Inventories – 408 408 Trade and other receivables – 3,849 3,849 Cash and cash equivalents – 30,426 30,426 Trade and other payables – (9,398) (9,398) Loans and borrowings – (6,343) (6,343) Net identifiable assets acquired 7,923 25,316 33,239

Following the completion of the final purchase price allocation in financial year 2018, no adjustments were made to the provisional fair values originally recorded in the prior year in respect of Angsana.

269 Financial Statements Notes to the Financial Statements

43. ACQUISITIONS OF SUBSIDIARIES (continued) Net cash outflow arising from acquisitions of subsidiaries ME-Di Angsana Total RM’000 RM’000 RM’000 Purchase consideration settled in cash and cash equivalents 7,923 29,237 37,160 Less: Cash and cash equivalents acquired – (30,426) (30,426) 7,923 (1,189) 6,734

Goodwill ME-Di Angsana Total Note RM’000 RM’000 RM’000 Fair value of consideration transferred 7,923 29,237 37,160 Fair value of net identified assets acquired (7,923) (25,316) (33,239) Non-controlling interests, based on their proportionate interest in the net identifiable assets acquired – 11,392 11,392 Goodwill 6 – 15,313 15,313

Acquisition-related costs The Group incurred acquisition-related costs of approximately RM1,782,000 relating to external legal fees and due diligence costs. The legal fees and due diligence costs have been included in other operating expenses in the Group’s consolidated statement of profit or loss and other comprehensive income.

Post-acquisition contributions to the Group ME-Di Angsana Total RM’000 RM’000 RM’000 Revenue – 2,975 2,975 Net loss – (6,959) (6,959)

If the above acquisitions had occurred on 1 January 2017, the Group will report a consolidated Group revenue of RM11,148,027,000 and a consolidated Group profit after tax of RM822,810,000 for the financial year.

270 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

44. DISPOSAL OF A SUBSIDIARY Disposal of a subsidiary in 2017 In November 2017, a 59.6% owned subsidiary, Acibadem Poliklinikleri A.S. (“POL”) disposed of its 60% equity interest in SESU Ozel Saglik Hizmetleri Tibbi Malzemeler ve Ticaret A.S. (“SESU”) to Ali Suat Gulluoglu (“Disposal”) which was satisfied by share swap with Ali Suat Gulluoglu for his 30.10% equity interest in Medlife Clinic Ambulance ve Ozel Saglik Hizmetleri Ithalat ve Ihracat A.S. (“Medlife”). Following the Disposal, SESU ceased to be a subsidiary of POL.

The effects of the disposal are as follows:

Note RM’000 Property, plant and equipment 3 68 Intangible assets 6 217 Deferred tax assets 11 81 Inventories 39 Trade and other receivables 1,215 Tax recoverable 151 Cash and cash equivalents 9 Trade and other payables (3,535) Employee benefits (1) Loans and borrowings (27) Deferred tax liabilities 11 (132) Net identifiable assets (1,915) Less: Non-controlling interests 766 Gain on disposal of a subsidiary recognised in profit or loss 30 1,149 Cash consideration – Less: Cash and cash equivalents disposed (9) Cash flow on disposal, net of cash disposed (9)

45. CHANGES IN OWNERSHIP INTEREST IN SUBSIDIARIES Changes in ownership interests in subsidiaries in 2018 (a) In January 2018 and February 2018 respectively, Parkway-Healthcare Mauritius Limited (“PHML”) acquired a total of 1.70% equity interest in Ravindranath GE Medical Associates Private Limited (“RGE”) for a total cash consideration of INR272,109,000 (equivalent to RM16,863,000). Consequential thereto, IHH Group’s interest in RGE increased from 76.25% to 77.96%.

The transaction resulted in a decrease in capital reserve and non-controlling interests of RM15,534,000 and RM1,329,000 respectively.

(b) In February 2018, Parkway Holdings Limited (“PHL”) disposed 26% equity interest in Gleneagles JPMC Sdn. Bhd. (“GJPMC”) to Jerudong Park Medical Centre Sdn. Bhd. at a total consideration of BND4,203,000 (equivalent to RM12,509,000). Consequential thereto, the Group’s interest in GJPMC decreased from 75.0% to 49.0%.

The transaction resulted in a decrease in capital reserve of RM6,425,000 and an increase in non-controlling interests of RM18,935,000.

(c) In April 2018, PTM transferred 140,900 PLife REIT units that it owned to its eligible employees in accordance to PTM’s LTIP. Consequential thereto, the Group’s effective interest in PLife REIT was diluted from 35.69% to 35.66%.

The transaction resulted in an increase in capital reserve, non-controlling interests and hedge reserve of RM620,000, RM618,000 and RM1,000 respectively, and a decrease in foreign currency translation reserve of RM3,000.

271 Financial Statements Notes to the Financial Statements

45. CHANGES IN OWNERSHIP INTEREST IN SUBSIDIARIES (continued) Changes in ownership interests in subsidiaries in 2018 (continued) (d) In May 2018, GDPL subscribed for 35,087,716 new equity shares in Continental Hospitals Private Limited (“CHL”) for a total consideration of INR1,400,000,000 (equivalent to RM82,600,000) pursuant to the rights issue undertaken by CHPL. Post the rights issue, GDPL’s equity interest in CHPL increased from 53.13% to 62.23%.

The transaction resulted in a decrease in capital reserve of RM20,515,000 and an increase in non-controlling interest of RM20,515,000.

(e) In August 2018, the Group’s interest in RGE was diluted by 4.09% from 77.96% to 73.87% as the conversion ratio for the remaining tranches of CCPS held by the non-controlling interests were fixed and these CCPS were reclassified from other payables to equity.

The transactions resulted in an increase of RM60,830,000 and RM24,629,000 in the capital reserve and non-controlling interests respectively.

(f) In November 2018, Integrated Healthcare Hastaneler Turkey Sdn. Bhd. (“IHH Turkey”) has completed the acquisition of 458,399,999 equity shares in ASYH from ASYH’s existing two shareholders, namely Bagan Lalang Ventures Sdn. Bhd. and Mehmet Ali Aydinlar, through a share swap of 524,492,824 new ordinary shares of the Company. Consequential thereto, IHH Turkey’s equity interest in ASYH has increased from 60.0% to approximately 90.0%.

The transactions resulted in an increase of RM2,931,915,000 and RM345,529,000 in share capital of the Company and non-controlling interests, respectively, and a decrease of RM3,277,444,000 in the capital reserve.

Changes in ownership interests in subsidiaries in 2017 (a) In April 2017, PTM transferred 155,200 PLife REIT units that it owned to its eligible employees in accordance to PTM’s Long Term Incentive Plan. Consequential thereto, the Group’s effective interest in PLife REIT was diluted from 35.71% to 35.69%.

The transaction resulted in an increase in capital reserve, non-controlling interests and hedge reserve of RM898,000, RM257,000 and RM2,000 respectively, and a decrease in foreign currency translation reserve of RM3,000.

(b) In April 2017, Parkway Group Healthcare Pte. Ltd. (“PGH”) divested 29.9% equity interest in PCH to TK Healthcare Investment Limited (“Taikang”) through a combination of secondary sale and allotment of new shares by PCH to Taikang as detailed below. Consequential thereto, the Group’s effective interest in PCH decreased from 100% to 70.1%.

The transaction resulted in an increase in capital reserve and non-controlling interests of RM299,609,000 and RM310,734,000 respectively, and a decrease in foreign currency translation reserve of RM1,116,000.

Pursuant to the divestment, PGH received a deposit of RMB10,000,000 (equivalent to RM6,231,000) from the non- controlling interest for granting PGH a put option to require the non-controlling interest to purchase another 10.1% shares in PCH from PGH when the regulations allow the non-controlling interest to increase its stake in PCH. The put option is valid till July 2018 and the deposit is non-refundable if the put option is not exercised.

(c) In April and June 2017, CHL allotted 3,807,106 and 2,358,071 equity shares respectively to GDPL. Consequential thereto, the Group’s effective interest in CHL was increased from 51% to 53.13%.

The transactions resulted in a decrease in capital reserve of RM4,484,000 and an increase in non-controlling interests of RM4,484,000.

(d) In May 2017, Gleneagles (Malaysia) Sdn. Bhd. (“GMSB”) acquired 269,444 ordinary shares representing approximately 1.107% of the total issued shares of Pulau Pinang Clinic Sdn. Bhd. (“PPCSB”) from 3 minority shareholders for a total cash consideration of RM5,928,000. Consequential thereto, the Group’s effective interest in PPCSB increased from 70.77% to 71.88%.

The transaction resulted in a decrease in capital reserve and non-controlling interests of RM3,008,000 and RM2,919,000 respectively.

272 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

45. CHANGES IN OWNERSHIP INTEREST IN SUBSIDIARIES (continued) Changes in ownership interests in subsidiaries in 2017 (continued) (e) In May 2017, ASH disposed of 15% equity interest in ACC to International Finance Corporation for a total consideration of EUR15,000,000 (equivalent to RM67,322,000). Consequential thereto, the Group’s effective interest in ACC decreased from 41.2% to 32.2%.

The transaction resulted in an increase in capital reserve and non-controlling interests of RM93,000 and RM67,229,000 respectively.

(f) In May 2017, ASH acquired 1.83% equity interest in ACC from Ilian Georgiev Grigorov for a total consideration of EUR1,468,000 (equivalent to RM6,957,000). Consequential thereto, the Group’s effective interest in ACC increased from 32.2% to 33.3%.

The transaction resulted in a increase in capital reserve and a decrease in non-controlling interests of RM645,000 and RM7,795,000 respectively.

(g) In November 2017, POL acquired the remaining 40% equity interest in Medlife and Ozel Turgutreis Poliklinik Hizmetleri Ticaret A.S. (“T.Reis”). Consequential thereto, the Group’s effective interest in the 2 companies increased from 35.7% to 59.6%. The 2 companies were subsequently merged with POL and dissolved in December 2017.

The transaction resulted in a decrease in capital reserve and an increase in non-controlling interests of RM399,000 and RM399,000 respectively.

46. SUBSIDIARIES Details of subsidiaries are as follows:

Effective equity Place of interest held incorporation 2018 2017 Name of subsidiary and business Principal activities % % Direct subsidiaries IMU Health Sdn. Bhd. Malaysia Investment holding and provision of 100 100 management services to its subsidiaries

Integrated Healthcare Holdings Limited Federal Territory of Investment holding 100 100 Labuan Malaysia

Integrated Healthcare Holdings Mauritius Investment holding 100 100 (Bharat) Limited #

Integrated Healthcare Turkey Federal Territory of Investment holding 100 100 Yatirimlari Limited Labuan Malaysia

273 Financial Statements Notes to the Financial Statements

46. SUBSIDIARIES (continued) Effective equity Place of interest held incorporation 2018 2017 Name of subsidiary and business Principal activities % % Indirect subsidiaries Held through IMU Health Sdn. Bhd.: IMU Education Sdn. Bhd. Malaysia Establishing and carrying on the 100 100 business of managing educational institutions, colleges, schools and other centres of learning, research and education

IMU Healthcare Sdn. Bhd. Malaysia Investment holding and provision of 100 100 healthcare services

IMC Education Sdn. Bhd. Malaysia Provision of educational programs and 100 100 training courses for healthcare and related fields

Held through Integrated Healthcare Holdings Limited: Parkway Pantai Limited # Singapore Investment holding 100 100

Held through Integrated Healthcare Holdings (Bharat) Limited: Integrated (Mauritius) Healthcare Mauritius In the process of striking off 100 100 Holdings Limited +

Held through IMU Healthcare Sdn. Bhd.: IMU Dialysis Sdn. Bhd. Malaysia Establishing, operating and managing 60 60 dialysis centre(s) for the provision of haemodialysis services

Held through Integrated Healthcare Turkey Yatirimlari Limited: Integrated Healthcare Hastaneler Malaysia Investment holding 100 100 Turkey Sdn. Bhd.

Held through Parkway Pantai Limited: Parkway HK Holdings Limited # (1) Hong Kong Investment holding 100 100

Parkway Holdings Limited # Singapore Investment holding 100 100

Pantai Diagnostics Indonesia Sdn. Bhd. Malaysia Dormant 100 100

Pantai Holdings Sdn. Bhd. Malaysia Investment holding 100 100

Parkway Group Healthcare Pte Ltd # (2) Singapore Investment holding and 100 100 provision of management and consultancy services

Gleneagles Development Pte Ltd # (3) Singapore Investment holding 100 100

Parkway Healthcare Indo-China Pte. Ltd. # Singapore Investment holding 100 100

274 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

46. SUBSIDIARIES (continued) Effective equity Place of interest held incorporation 2018 2017 Name of subsidiary and business Principal activities % %

Indirect subsidiaries (continued) Held through Parkway Pantai Limited: (continued) Northern TK Venture Pte. Ltd # Singapore Investment holding 100 100

Angsana Holdings Pte. Ltd # Singapore Investment holding 55 55

Held through Integrated Healthcare Hastaneler Turkey Sdn. Bhd.: Acıbadem Sağlık Yatırımları Holding A.Ş. # Turkey Investment holding 90 60

Held through Acıbadem Sağlık Yatırımları Holding A.Ş.: APlus Hastane Otelcilik Hizmetleri A.Ş. # Turkey Provision of catering, laundry and 90 60 cleaning services for hospitals

Acıbadem Proje Yönetimi A.Ş. # Turkey Supervise and manage the construction 90 60 of healthcare facilities

Acıbadem Sağlık Hizmetleri ve Turkey Provision of medical, surgical and 89.8 59.6 Ticaret A.Ş. # hospital services

Held through Acıbadem Sağlık Hizmetleri ve Ticaret A.Ş.: Acıbadem Poliklinikleri A.Ş. # Turkey Provision of outpatient and surgical (in 89.8 59.6 certain clinics only) services

Acıbadem Labmed Sağlık Hizmetleri A.Ş. # Turkey Provision of laboratory services 89.8 59.6

International Hospital İstanbul A.Ş. # Turkey Provision of medical, surgical and 80.8 53.6 hospital services

Acıbadem Mobil Sağlık Hizmetleri A.Ş. # Turkey Provision of emergency, home and 89.8 59.6 ambulatory care services

Clinical Hospital Acıbadem Macedonia Provision of medical, surgical and 45.2 30.0 Sistina Skopje # hospital services

Acıbadem Sistina Medikal Macedonia Provision of medical equipment and 44.9 29.8 Kompani Doo Skopje # import and wholesale of drug and medical materials

Acıbadem Ortadogu Saglik Turkey Construction and planning of healthcare 89.8 59.6 Yatirimlari A.Ş. # facilities, provision of operation and management services to healthcare institutions and secondary logistic services such as catering cleaning, laundry services

Acibadem International Netherlands Provision of outpatient services 89.8 59.6 Medical Center B.V. #

275 Financial Statements Notes to the Financial Statements

46. SUBSIDIARIES (continued) Effective equity Place of interest held incorporation 2018 2017 Name of subsidiary and business Principal activities % %

Indirect subsidiaries (continued) Held through Acıbadem Sağlık Hizmetleri ve Ticaret A.Ş.: (continued) Acıbadem Teknoloji A.Ş. # Turkey Conduct research, develop and 89.8 59.6 commercially market healthcare information systems, web-based applications and other technology solutions nationally and internationally

APlus Saglik Hizmetleri A.S. # Turkey Provision of medical, surgical and 89.8 59.6 hospital services

Acibadem City Clinic B.V. # (4) Netherlands Investment holding 50.2 33.3

Held through Acıbadem Poliklinikleri A.Ş.: Gemtip Özel Sağlık Hizmetleri Turkey Provision of outpatient services 61.1 40.5 Sanayi ve Ticaret A.S. #

Bodrum Medikal Özel Sağlık Hizmetleri Turkey Provision of outpatient services 53.9 35.7 Turizm Gıda İnşaat Pazarlama İthalat İhracat Sanayi ve Ticaret A.Ş. #

Held through Clinical Hospital Acıbadem Sistina Skopje: Ordinacija po Interna Medicina Acibadem Bulgaria Dissolved during the year – 30.0 Sistina Bitola 24 #

Poliklinika Acibadem Sistina Bitola 27 # Bulgaria Dissolved during the year – 30.0

Held through Acibadem City Clinic B.V.: Acibadem City Clinic EAD # Bulgaria Investment holding 50.2 33.3

Held through Acibadem City Clinic EAD: Acibadem City Clinic University Bulgaria University multi-profile hospital 50.2 33.3 Hospital EOOD # for acute care

Acibadem City Clinic Cardiac Bulgaria Specialised hospital for acute care of 35.1 23.3 Surgery Hospital Burgas OOD # cardiac surgery

Acibadem City Clinic Diagnostic and Bulgaria Outpatient diagnostic and 50.2 33.3 Consultative Centre EOOD # consultative centre

Acibadem City Clinic Medical Center Bulgaria Outpatient medical centre 50.2 33.3 Varna EOOD #

Acibadem City Clinic Medical Center Bulgaria Outpatient medical centre 50.2 33.3 Burgas EOOD #

Acibadem City Clinic Pharmacies EOOD # Bulgaria Pharmacy 50.2 33.3

276 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

46. SUBSIDIARIES (continued) Effective equity Place of interest held incorporation 2018 2017 Name of subsidiary and business Principal activities % %

Indirect subsidiaries (continued) Held through Acibadem City Clinic EAD: (continued) Healthcare Consulting OOD # Bulgaria Clinical research 25.3 16.8

Tokuda Clinical Research Center AD # Bulgaria Clinical research 42.6 28.3

Acibadem City Clinic Hospice EOOD # Bulgaria Hospice care centre 50.2 33.3

Tokuda Pharmacy EOOD # Bulgaria Pharmacy 50.2 33.3

Acibadem City Clinic Diagnostic and Bulgaria Outpatient diagnostic and 50.2 33.3 Consultation Center Tokuda EAD # consultative centre

Acibadem City Clinic Tokuda Bulgaria Multi-profile hospital for acute care 50.2 33.3 Hospital EAD #

Held through Pantai Holdings Sdn. Bhd.: Pantai Group Resources Sdn. Bhd. Malaysia Investment holding 100 100

Pantai Hospitals Sdn. Bhd. Malaysia Investment holding and provision of 100 100 management and consultation services to hospitals and medical centres

Pantai Management Resources Sdn. Bhd. Malaysia Dormant 100 100

Gleneagles (Malaysia) Sdn. Bhd. Malaysia Investment holding 100 100

Held through Pantai Group Resources Sdn. Bhd.: P.T. Pantai Healthcare Consulting # (5) Indonesia Dormant 100 100

Pantai Premier Pathology Sdn. Bhd. Malaysia Provision of medical laboratory services 100 100

Pantai Integrated Rehab Services Malaysia Provision of rehabilitation services 100 100 Sdn. Bhd.

Twin Towers Healthcare Sdn. Bhd. Malaysia In the process of Members’ Voluntary 100 100 Winding-up

Pantai Wellness Sdn. Bhd. Malaysia Provision of health and 100 100 wellness services

POEM Corporate Health Services Malaysia Provision of occupational and 100 100 Sdn. Bhd. environmental health services and other industry specific medical services to corporate clients

Twin Towers Medical Centre KLCC Malaysia Operation of an outpatient and daycare 100 100 Sdn. Bhd. medical centre

277 Financial Statements Notes to the Financial Statements

46. SUBSIDIARIES (continued) Effective equity Place of interest held incorporation 2018 2017 Name of subsidiary and business Principal activities % %

Indirect subsidiaries (continued) Held through Pantai Hospitals Sdn. Bhd.: Pantai Medical Centre Sdn. Bhd. Malaysia Provision of medical, surgical and 100 100 hospital services, as well as providing administrative support, management and consultancy services

Cheras Medical Centre Sdn. Bhd. Malaysia Dormant 100 100

Pantai Klang Specialist Medical Centre Malaysia Dormant 100 100 Sdn. Bhd.

Syarikat Tunas Pantai Sdn. Bhd. Malaysia Provision of medical, surgical and 100 100 hospital services

Paloh Medical Centre Sdn. Bhd. Malaysia Provision of medical, surgical and 95.6 95.6 hospital services

Hospital Pantai Ayer Keroh Sdn. Bhd. Malaysia Dormant 100 100

Hospital Pantai Indah Sdn. Bhd. Malaysia Provision of medical, surgical and 100 100 hospital services

Pantai Hospital Sungai Petani Sdn. Bhd. Malaysia Dormant 100 100

Pantai Screening Services Sdn. Bhd. Malaysia Dormant 100 100

Gleneagles Hospital (Kuala Lumpur) Malaysia Dormant 100 100 Sdn. Bhd. (6)

Pantai Hospital Manjung Sdn. Bhd. Malaysia Dormant 100 100

Pantai Hospital Johor Sdn. Bhd. Malaysia Development, construction and leasing 100 100 of medical facility buildings

Kuala Lumpur Medical Centre Malaysia Struck off during the year – 51 (Asia Pacific) Sdn. Bhd.

Amanjaya Specialist Centre Sdn. Bhd. Malaysia Specialist hospital 100 –

Held through Pantai Medical Centre Sdn. Bhd.: Pantai-ARC Dialysis Services Sdn. Bhd. Malaysia Provision of haemodialysis services 51 51

HPAK Cancer Centre Sdn. Bhd. Malaysia Dissolved during the year – 100

Oncology Centre (KL) Sdn. Bhd. Malaysia Provision of comprehensive 100 100 professional oncological services, inclusive of diagnostic, radiotherapy and chemotherapy treatment

278 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

46. SUBSIDIARIES (continued) Effective equity Place of interest held incorporation 2018 2017 Name of subsidiary and business Principal activities % %

Indirect subsidiaries (continued) Held through Pantai Premier Pathology Sdn. Bhd.: Orifolio Options Sdn. Bhd. Malaysia Letting of property 100 100

Held through Gleneagles (Malaysia) Sdn. Bhd.: Pulau Pinang Clinic Sdn. Bhd. Malaysia Rendering of hospital services 71.88 71.88

GEH Management Services (M) Sdn. Bhd. Malaysia Dormant 100 100

Held through Parkway Healthcare Indo-China Pte Ltd: Andaman Alliance Healthcare Limited #(13) Myanmar Provision of medical and health related 52 52 facilities and services

Held through Parkway HK Holdings Limited: Parkway Healthcare Hong Kong Provision of medical and healthcare 100 100 (Hong Kong) Limited # outpatient services

GHK Hospital Limited # Hong Kong Private hospital ownership, 60 60 development and management

Held through Parkway Holdings Limited: Parkway Hospitals Singapore Pte. Ltd. # Singapore Private hospitals ownership 100 100 and management

Parkway Trust Management Limited # Singapore Provision of management services to 100 100 PLife REIT

Parkway Investments Pte. Ltd. # Singapore Investment holding 100 100

Parkway Novena Pte. Ltd. # Singapore Development, ownership and 100 100 management of private hospital premises

Parkway Irrawaddy Pte. Ltd. # Singapore Development, ownership and 100 100 management of a medical centre

Parkway Shenton Pte Ltd # Singapore Investment holding and operation of a 100 100 network of clinics and provision of comprehensive medical and surgical advisory services

Medi-Rad Associates Ltd # Singapore Operation of radiology clinics 100 100

Parkway Laboratory Services Ltd. # Singapore Provision of comprehensive diagnostic 100 100 laboratory services

Gleneagles Medical Holdings Limited # Singapore Investment holding 100 100

279 Financial Statements Notes to the Financial Statements

46. SUBSIDIARIES (continued) Effective equity Place of interest held incorporation 2018 2017 Name of subsidiary and business Principal activities % %

Indirect subsidiaries (continued) Held through Parkway Holdings Limited: (continued) Parkway College of Nursing and Singapore Provision of courses in nursing and 100 100 Allied Health Pte. Ltd. # allied health

iXchange Pte. Ltd. # Singapore Agent and administrator for managed 100 100 care and related services

Gleneagles JPMC Sdn. Bhd. # Brunei Darussalam Management and operation of a cardiac 49 75 and cardiothoracic care centre

Gleneagles Management Singapore Provision of advisory, administrative, 100 100 Services Pte Ltd # management and consultancy services to healthcare facilities

Held through Parkway Hospitals Singapore Pte. Ltd.: Parkway Promotions Pte Ltd # Singapore Dormant 100 100

MENA Services Pte Ltd # Singapore Struck off during the year – 100

Held through Parkway Group Healthcare Pte Ltd: Parkway-Healthcare (Mauritius) Ltd ## Mauritius Investment holding 100 100

Gleneagles International Pte. Ltd. # Singapore Investment holding 100 100

Shanghai Gleneagles International People’s Republic Dissolved during the year – 70 Medical and Surgical Center # of China

PCH Holding Pte. Ltd. # Singapore Investment holding 70.1 70.1

Shanghai Gleneagles Hospital People’s Republic Provision of management and 100 100 Management Co., Ltd # of China consultancy services to healthcare facilities

Held through PCH Holding Pte. Ltd.: Medical Resources International Pte Ltd # Singapore Investment holding 70.1 70.1

M & P Investments Pte Ltd # Singapore Investment holding 70.1 70.1

Parkway (Shanghai) Hospital People’s Republic Provision of management and 70.1 70.1 Management Ltd. # of China consultancy services to healthcare facilities

280 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

46. SUBSIDIARIES (continued) Effective equity Place of interest held incorporation 2018 2017 Name of subsidiary and business Principal activities % %

Indirect subsidiaries (continued) Held through M & P Investments Pte Ltd: ParkwayHealth Shanghai Hospital People’s Republic Provision of medical and health related 49.07 49.07 Company Limited (formerly known as of China facilities and services ParkwayHealth Shanghai International Hospital Company Limited) #

Gleneagles Chengdu Hospital People’s Republic Provision of specialised care 49.07 49.07 Company Limited # of China and services

ParkwayHealth Zifeng Nanjing OBGYN People’s Republic Provision of medical and health related 42.06 42.06 Hospital Company Limited # of China facilities and services

Held through Medi-Rad Associates Ltd: Radiology Consultants Pte Ltd # Singapore Provision of radiology consultancy and 100 100 interpretative services

Held through Gleneagles Development Pte Ltd: Continental Hospitals Private Limited # (13) India Private hospital ownership 62.23 53.13 and management

Ravindranath GE Medical Associates India Private hospital ownership and 73.87 76.25 Private Limited # (7) (13) management, specialty tertiary care including multi organ transplant healthcare facility

Parkway Healthcare India India Provision of management and 100 100 Private Limited # (13) consultancy services

Held through Continental Hospitals Private Limited: C3 Health Community Corporation India Operation of clinics 60.99 52.07 Private Limited ## (13)

Continental Community Clinics India Dormant 60.99 52.07 Private Limited ## (13)

Held through Ravindranath GE Medical Associates Private Limited: Centre for Digestive and Kidney India Private hospital ownership and 48.00 49.55 Diseases (India) Private Limited # (13) management, specialty tertiary care including multi organ transplant healthcare facility

Global Clinical Research Services India Provision of clinical research services 73.63 76.02 Private Limited # (13)

281 Financial Statements Notes to the Financial Statements

46. SUBSIDIARIES (continued) Effective equity Place of interest held incorporation 2018 2017 Name of subsidiary and business Principal activities % %

Indirect subsidiaries (continued) Held through Parkway Shenton Pte Ltd: Nippon Medical Care Pte Ltd # Singapore Operation of clinics 70 70

Parkway Shenton International Singapore Investment holding 100 100 Holdings Pte. Ltd. #

Shenton Family Medical Clinics Pte Ltd # Singapore To provide, establish and carry on the 100 100 business of clinics

Held through Parkway Shenton International Holdings Pte. Ltd.: Parkway Shenton Vietnam Limited + Vietnam Dormant 100 100

Held through Medical Resources International Pte Ltd: Shanghai Rui Xin Healthcare Co., Ltd. # (8) People’s Republic Provision of medical and healthcare 70.1 70.1 of China outpatient services

Shanghai Rui Hong Clinic Co., Ltd. # (9) People’s Republic Provision of medical and healthcare 70.1 70.1 of China outpatient services

Shanghai Xin Rui Healthcare Co., Ltd. # (10) People’s Republic Provision of medical and healthcare 70.1 70.1 of China outpatient services

Chengdu Shenton Health Clinic Co., Ltd People’s Republic Management and operation of medical 42.06 – (formerly known as Sincere Chengdu of China and health related facilities and Clinic Co., Ltd) # services

Held through Parkway (Shanghai) Hospital Management Ltd.: Shanghai Shu Kang Hospital Investment People’s Republic Investment holding 70.1 70.1 Management Co., Ltd. # of China

Suzhou Industrial Park Yuan Hui People’s Republic Provision of medical and healthcare 70.1 70.1 Clinic Co., Ltd. # of China outpatient services

Held through Shanghai Shu Kang Hospital Investment Management Co., Ltd.: Shanghai Mai Kang Hospital Investment People’s Republic of Investment holding 70.1 70.1 Management Co., Ltd. # China

Held through Shanghai Mai Kang Hospital Investment Management Co., Ltd.: Chengdu Rui Rong Clinic Co., Ltd. # People’s Republic Provision of medical and healthcare 70.1 70.1 of China outpatient services

Shanghai Rui Pu Clinic Co., Ltd. # People’s Republic Provision of medical and healthcare 70.1 70.1 of China outpatient services

282 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

46. SUBSIDIARIES (continued) Effective equity Place of interest held incorporation 2018 2017 Name of subsidiary and business Principal activities % %

Indirect subsidiaries (continued) Held through Shanghai Mai Kang Hospital Investment Management Co., Ltd.: (continued) Shanghai Rui Xiang Clinic Co., Ltd. # People’s Republic Provision of medical and healthcare 70.1 70.1 of China outpatient services

Shanghai Rui Ying Clinic Co., Ltd. # People’s Republic Provision of medical and healthcare 70.1 70.1 of China outpatient services

Held through Northern TK Venture Pte Ltd: Fortis Healthcare Limited # (13) India Investment holding 31.1 –

Held through Fortis Healthcare Limited: Hiranandani Healthcare Private Limited # (13) India Operates a multi-specialty hospital 31.1 –

Fortis Hospotel Limited ## (13) India Operates clinical establishment 15.86 –

Fortis La Femme Limited # (13) India Investment holding 31.1 –

Fortis Healthcare International Limited ## (13) Mauritius Investment holding 31.1 –

SRL Limited # (13) India Operates a network of 17.66 – diagnostics centres

Escorts Heart Institute and Research India Operates a multi-specialty hospital 31.1 – Centre Limited # (13)

Fortis Hospitals Limited # (13) India Operates a network of 31.1 – multi-specialty hospitals

Fortis CSR Foundation ## (13) India Non-profit Company for carrying out 31.1 – Corporate Social Responsibilities

Held through SRL Limited: SRL Diagnostics Private Limited # (13) India Operates a network of 17.66 – diagnostics centres

SRL Reach Limited # (13) India Operates a network of 17.66 – diagnostics centres

SRL Diagnostics FZ-LLC ## (13) United Arab Operates a network of 17.66 – Emirates diagnostics centres

Held through SRL Diagnostics FZ-LLC: SRL Diagnostic Middle East LLC ## (13) United Arab Investment holding 8.65 – Emirates

283 Financial Statements Notes to the Financial Statements

46. SUBSIDIARIES (continued) Effective equity Place of interest held incorporation 2018 2017 Name of subsidiary and business Principal activities % %

Indirect subsidiaries (continued) Held through Fortis Hospitals Limited: Fortis Emergency Services Limited ## (13) India Operates ambulance services 31.1 –

Fortis Cancer Care Limited # (13) India Investment holding 31.1 –

Fortis Malar Hospitals Limited # (13) India Operates a multi-specialty hospital 19.58 –

Fortis Health Management (East) Limited # (13) India Operates a hospital 31.1 –

Birdie & Birdie Realtors Private Limited ## (13) India Renting of immovable property 31.1 –

Stellant Capital Advisory Services India Merchant banker 31.1 – Private Limited ## (13)

Fortis Global Healthcare Mauritius Investment holding 31.1 – (Mauritius) Limited ## (13)

Held through Escorts Heart Institute and Research Centre Limited: Fortis Asia Healthcare Pte. Limited ## (13) Singapore Investment holding 31.1 –

Fortis Health Staff Limited ## (13) India Operates a network of Heart 31.1 – Command centres

Held through Fortis Asia Healthcare Pte. Limited: Fortis Healthcare International Singapore Investment holding 31.1 – Pte Limited ## (13)

Held through Fortis Healthcare International Pte Limited: MENA Healthcare Investment British Virgin Investment holding 25.67 – Company Limited ## (13) Islands

Held through Mena Healthcare Investment Company Limited: Medical Management British Virgin Investment holding 25.67 – Company Limited ## (13) Islands

Held through Fortis Malar Hospitals Limited: Malar Stars Medicare Limited # (13) India Investment holding 19.58 –

Held through Stellant Capital Advisory Services Private Limited: RHT Health Trust Manager Singapore Trustee-manager of a Business Trust 31.1 – Pte Limited ## (13)

284 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

46. SUBSIDIARIES (continued) Effective equity Place of interest held incorporation 2018 2017 Name of subsidiary and business Principal activities % %

Indirect subsidiaries (continued) Held through Parkway Investments Pte. Ltd.: Gleneagles Technologies Services Singapore Dormant 100 100 Pte Ltd #

Gleneagles Medical Centre Ltd. # Singapore Dormant 100 100

Gleneagles Pharmacy Pte Ltd # Singapore Dormant 100 100

Mount Elizabeth Medical Holdings Ltd. # Singapore Investment holding 100 100

Parkway Life Real Estate Singapore Real estate investment trust 35.66 35.69 Investment Trust # (11)

Held through Parkway Life Real Estate Investment Trust: Matsudo Investment Pte. Ltd. # Singapore Investment holding 35.66 35.69

Parkway Life Japan2 Pte. Ltd. # Singapore Investment holding 35.66 35.69

Parkway Life Japan3 Pte. Ltd. # Singapore Investment holding 35.66 35.69

Parkway Life Japan4 Pte. Ltd. # Singapore Investment holding 35.66 35.69

Parkway Life MTN Pte. Ltd. # Singapore Provision of financial and treasury services 35.66 35.69

Parkway Life Malaysia Pte. Ltd. # Singapore Investment holding 35.66 35.69

Held through Matsudo Investment Pte. Ltd.: Godo Kaisha Phoebe (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Held through Parkway Life Japan2 Pte. Ltd.: Godo Kaisha Del Monte (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Tenshi 1 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Tenshi 2 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

G.K. Nest (12) Japan Special purpose entity 35.66 – – Investment in real estate

285 Financial Statements Notes to the Financial Statements

46. SUBSIDIARIES (continued) Effective equity Place of interest held incorporation 2018 2017 Name of subsidiary and business Principal activities % %

Indirect subsidiaries (continued) Held through Parkway Life Japan3 Pte. Ltd.: Godo Kaisha Healthcare 1 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Healthcare 2 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Healthcare 3 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Healthcare 4 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Healthcare 5 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Held through Parkway Life Japan4 Pte. Ltd.: Godo Kaisha Samurai (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Samurai 2 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Samurai 3 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Samurai 4 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Samurai 5 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Samurai 6 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Samurai 7 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Samurai 8 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Samurai 9 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Samurai 10 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

286 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

46. SUBSIDIARIES (continued) Effective equity Place of interest held incorporation 2018 2017 Name of subsidiary and business Principal activities % %

Indirect subsidiaries (continued) Held through Parkway Life Japan4 Pte. Ltd.: (continued) Godo Kaisha Samurai 11 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Godo Kaisha Samurai 12 (12) Japan Special purpose entity 35.66 35.69 – Investment in real estate

Held through Parkway Life Malaysia Pte. Ltd.: Parkway Life Malaysia Sdn. Bhd. ## Malaysia Special purpose entity 35.66 35.69 – Investment in real estate

Held through Angsana Holdings Pte. Ltd.: Angsana Molecular & Diagnostics Singapore Provision of medical laboratories 55 55 Laboratory Pte. Ltd. # including biochemistry, chemistry, haematology and molecular blood analysis and testing

Angsana Molecular & Diagnostics Hong Kong Provision of molecular diagnostic assays 55 55 Laboratory (HK) Limited # and services

Angsana Molecular & Diagnostics Malaysia Research laboratories and carry on 55 55 Laboratory Sdn. Bhd. # business, including taking blood samples for testing

Held through Angsana Molecular & Diagnostics Laboratory Pte. Ltd.: Allergy Laboratory Pte Ltd # Singapore Dormant 55 55

1 PPL holds 99.99% shares in Parkway HK Holdings Limited. The other 0.01% shares are held by PHL. 2 PPL holds 78.52% shares in Parkway Group Healthcare Pte Ltd (“PGH”). The other 21.48% shares are held by PHL. 3 PPL holds more than 99.99% shares in Gleneagles Development Pte Ltd. The remaining are held by Gleneagles International Pte Ltd. 4 ASH and Clinical Hospital Acıbadem Sistina Skopje hold 48.3% and 15.0% shares in ACC respectively. 5 Pantai Group Resources Sdn. Bhd. holds 50% shares in P.T. Pantai Healthcare Consulting. The other 50% is held by Pantai Hospitals Sdn. Bhd. (“PHSB”). 6 PHSB holds 70% shares in Gleneagles Hospital (Kuala Lumpur) Sdn. Bhd.. The other 30% is held by Gleneagles (Malaysia) Sdn. Bhd.. 7 Gleneagles Development Pte Ltd holds 72.26% (2017: 76.25%) share in Ravindranath GE Medical Associates Pte Ltd (“RGE”). The other 1.61% is held by Parkway-Healthcare (Mauritius) Ltd. The Group consolidated 73.87% (2017: 76.25%) of RGE on the basis of shareholding interests that give rise to present access to the rights and rewards of ownership in RGE. The Group’s equity interest in RGE is 73.87% (2017: 72.26%) on a fully diluted basis. 8 Medical Resources International Pte Ltd (“MRI”) holds 70% shares in Shanghai Rui Xin Healthcare Co., Ltd.. The other 30% is held by Shanghai Mai Kang Hospital Investment Management Co., Ltd. (“Shanghai Mai Kang”). 9 MRI holds 70% shares in Shanghai Rui Hong Clinic Co., Ltd.. The other 30% is held by Shanghai Mai Kang. 10 MRI holds 70% shares in Shanghai Xin Rui Healthcare Co., Ltd.. The other 30% is held by Shanghai Mai Kang. 11 Parkway Investment Pte. Ltd., PTM and Integrated Healthcare Holdings Limited hold 35.25% (2017: 35.25%), 0.38% (2017: 0.40) and 0.04% (2017: 0.04%) of the units in PLife REIT respectively. 12 Not required to be audited under the laws of country of incorporation. These special purpose entities have been consolidated in the financial statements in accordance with MFRS 10, as the Group primarily bears the risks and enjoys the benefits of the investments held by these special purpose entities. 13 The entity was granted approval by Companies Commission of Malaysia to have a financial year which does not coincide with the Company. # Audited by other member firms of KPMG International. ## Audited by firms other than member firms of KPMG International. + Audit is not required.

287 Financial Statements Notes to the Financial Statements

47. ASSOCIATES Details of associates are as follows:

Effective equity Place of interest held incorporation 2018 2017 Name of associate and business Principal activities % % Indirect associates Held through Gleneagles (Malaysia) Sdn. Bhd.: Gleneagles Medical Centre Malaysia Dissolved during the year – 30 (Kuala Lumpur) Sdn. Bhd. ##

Held through Gleneagles Medical Holdings Limited: PT Tritunggal Sentra Indonesia Provision of medical diagnostic services 30 30 Utama Surabaya ##

Asia Renal Care Mount Elizabeth Singapore Provision of dialysis services and 20 20 Pte Ltd ## medical consultancy services

Asia Renal Care (Katong) Pte Ltd ## Singapore Provision of dialysis services and 20 20 medical consultancy services

Held through Medi-Rad Associates Ltd: Positron Tracers Pte. Ltd. # Singapore Ownership and operation of a cyclotron 33 33 for production of radioactive tracers

Held through Fortis Healthcare Limited: Sunrise Medicare Private Limited ## India Liquidation in process 9.72 –

Held through Fortis Healthcare International Limited: The Medical and Surgical Mauritius Operates a multi-specialty hospital 8.98 – Centre Limited ##

RHT Health Trust ## (1) Singapore Investment holding company 8.65 –

Held through Fortis Healthcare International Pte Limited: Lanka Hospitals Corporation Plc # Sri Lanka Operates a multi-specialty hospital 8.91 –

1 Fortis Healthcare International Limited holds 25.14% share in RHT Health Trust. The other 2.68% is held by RHT Health Trust Manager Pte Limited. # Audited by other member firms of KPMG International. ## Audited by firms other than member firms of KPMG International.

288 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

48. JOINT VENTURES Details of joint ventures are as follows:

Effective equity Place of interest held incorporation 2018 2017 Name of joint venture and business Principal activities % % Indirect joint ventures Held through Gleneagles Development Pte Ltd: Apollo Gleneagles Hospital Ltd ## India Private hospital ownership and 50 50 management

Held through Parkway-Healthcare (Mauritius) Ltd: Apollo Gleneagles PET-CT India Operation of PET-CT radio 50 50 Private Limited ## imaging centre

Held through Shenton Family Medical Clinics Pte Ltd: Shenton Family Medical Clinic Singapore Operation of medical clinic 60 – (Ang Mo Kio) +

Shenton Family Medical Clinic Singapore Operation of medical clinic 50 50 (Bedok Reservoir) +

Shenton Family Medical Clinic Singapore Deregistered – 50 (Bukit Gombak) +

Shenton Family Medical Clinic (Duxton) + Singapore Operation of medical clinic 50 50

Shenton Family Medical Clinic Singapore Operation of medical clinic 50 50 (Jurong East) +

Shenton Family Medical Clinic Singapore Deregistered – 50 (Serangoon) +

Shenton Family Medical Clinic Singapore Operation of medical clinic 50 50 (Tampines) +

Shenton Family Medical Clinic (Yishun) + Singapore Operation of medical clinic 50 50

Shenton Family Medical Clinic (Towner) + Singapore Operation of medical clinic 50 50

Held through Parkway Shenton Pte Ltd: Hale Medical Clinic Singapore In liquidation 50 50 (Concourse) Pte Ltd ##

Held through Parkway Group Healthcare Pte Ltd: Khubchandani Hospitals India Dormant 50 50 Private Limited ##

Held through Shanghai Mai Kang Hospital Investment Management Co., Ltd.: Shanghai Hui Xing Hospital Investment People’s Republic Investment holding 42.06 42.06 Management Co., Ltd. # (1) of China

289 Financial Statements Notes to the Financial Statements

48. JOINT VENTURES (continued) Effective equity Place of interest held incorporation 2018 2017 Name of joint venture and business Principal activities % %

Indirect joint ventures (continued) Held through Shanghai Hui Xing Hospital Investment Management Co., Ltd.: Shanghai Hui Xing Jinpu Clinic Co., Ltd. # People’s Republic Provision of medical and healthcare 42.06 42.06 of China outpatient services

Held through SRL Limited: SRL Diagnostics (Nepal) Nepal Operates a network of 8.83 – Private Limited ## diagnostics centers

Held through SRL Diagnostics Private Limited: DDRC SRL Diagnostics Private Limited ## India Operates a network of 8.83 – diagnostics centers

Held through Fortis Hospitals Limited: Fortis C-Doc Healthcare Limited ## (1) India Operates a hospital 18.66 –

Held through Fortis Cancer Care limited: Fortis Cauvery (Partnership firm) ## India Under members voluntary liquidation 15.86 –

1 The Group has accounted for the entity as a joint venture in accordance with MFRS on the basis that the entity’s operating decisions are made jointly with the joint venture partner. # Audited by other member firms of KPMG International. ## Audited by firms other than member firms of KPMG International. + Audit is not required.

49. CONTINGENT LIABILITIES The following are the material litigations and investigations of Fortis which occurred prior to the Group’s acquisition of its 31.1% interest in Fortis in November 2018:

(a) In respect of Escorts Heart Institute and Research Centre Limited (“EHIRCL”), a subsidiary of Fortis:

i. The Delhi Development Authority (“DDA”) had terminated the lease deeds and allotment letters relating to land parcels on which the Fortis Escorts Hospital exists due to certain alleged non-compliances of such documents. Consequent to the termination, the DDA issued show cause notices and initiated eviction proceedings against EHIRCL. These terminations, show cause notices and eviction proceedings have been challenged by EHIRCL before the Hon’ble High Court of Delhi, Hon’ble Supreme Court and Estate Officer, respectively which are currently pending. Based on the external legal counsel opinions, EHIRCL is of the view that it will be able to suitably defend the termination orders, show cause notices and eviction proceedings.

ii. Further EHIRCL also has open tax demands of INR893.4 million (equivalent to RM52.5 million) for various assessment years before the Indian Income-tax authorities. While the Commissioner of Income Tax (Appeals) decided the case in favour of EHIRCL in the past, the Income Tax Department has filed an appeal before Income Tax Appellate Tribunal (“ITAT”) and the matter is currently pending at the ITAT. Based on management assessment, EHIRCL believes that it has a good chance of success in these cases. Nevertheless, EHIRCL has a right to appeal to the High Court and the Supreme Court of India, thereafter.

290 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

49. CONTINGENT LIABILITIES (continued) (a) In respect of Escorts Heart Institute and Research Centre Limited (“EHIRCL”), a subsidiary of Fortis: (continued)

iii. In relation to the judgement of the Hon’ble High Court of Delhi relating to provision of free treatment/beds to the economically weaker sections of society pursuant to such obligations set forth under certain land grant orders/ allotment letters (“EWS Obligations”), the Directorate of Health Services (“DoHS”), Government of NCT of Delhi, appointed a firm to calculate “unwarranted profits” arising to EHIRCL due to alleged non-compliance of such EWS Obligations. Following various hearings and appeals between 2014 and 2018, in a hearing before the DoHS in May 2018, an order was passed imposing a penalty of INR5.03 billion (equivalent to RM295.5 million) which was challenged by EHIRCL before the Delhi High Court. Through an order dated 1 June 2018, the Delhi High Court has issued notice and directed that no coercive steps may be taken subject to EHIRCL depositing a sum of INR50 million (equivalent to RM2.9 million) before the DoHS. In compliance of the above direction, EHIRCL had deposited the stipulated amount on 20 June 2018. A hearing in this matter was held on 12 March 2019 and was adjourned for the next hearing on 25 April 2019. Based on its internal assessment and advice from its counsels on the basis of the documents available, EHIRCL believes it is in compliance of the EWS Obligations and expects the demand to be set aside.

b) In respect of Hiranandani Healthcare Private Limited (“HHPL”), a subsidiary of Fortis:

Through an order dated 8 January 2017, the Navi Mumbai Municipal Corporation (“NMMC”) has terminated the lease agreements with HHPL (“Termination Order”) for certain alleged contravention of such hospital lease agreement. HHPL has filed a writ petition before the Hon’ble Supreme Court of India towards challenging the Termination Order. The writ petition has been tagged with special leave petition which has also been filed by HHPL for inter alia challenging the actions of State Government, City Industrial Development Corporation and the NMMC which led to the passing of the Termination Order. The Hon’ble Supreme Court of India in the hearing held on 30 January 2017 ordered that status quo be maintained with regard to the operation of the hospital. Further, the special leave petition has been admitted by the Hon’ble Supreme Court on 22 January 2018 and status quo has been continuing ever since. Based on external legal counsel’s opinion, HHPL is confident that it is in compliance of conditions of the hospital lease agreements and accordingly considers that no provisions were required.

c) A civil suit has been filed by a third party (“Claimant’) against Fortis and certain subsidiaries (together “Defendants”) before the District Court, Delhi alleging, inter alia, implied ownership of the “Fortis”, “SRL” and “La-Femme” brands in addition to certain other financial claims and seeking a decree that consequent to a term sheet with a certain party, Fortis is liable for claims due to the Claimant from that certain party. In connection with this, the District Court passed an ex-parte order directing that any transaction undertaken by the defendants, in favour of any other party, affecting the interest of the Claimant shall be subject to orders passed by the District Court in the said civil suit. Additionally, the said certain party with whom the term sheet had been allegedly signed has also claimed that Fortis has not abided by the aforementioned term sheet and has therefore claimed alleged ownership over the brands apart from the alleged claim to have a right to invest in Fortis.

Fortis has filed written statements denying all allegations made against it and sought for dismissal of the said civil suit. Allegations made by the said certain party have been duly responded by Fortis denying (i) execution of any binding agreement with certain party, and (ii) liability of any kind whatsoever.

In addition to the above, Fortis has also received four notices from the Claimant claiming (i) INR180 million (equivalent to RM10.6 million) as per notices dated 30 May 2018, and 1 June 2018, (ii) INR2,158 million (equivalent to RM126.7 million) as per notice dated 4 June 2018, and (iii) INR196 million (equivalent to RM11.5 million) as per notice dated 4 June 2018. All these notices have been responded by Fortis denying any liability whatsoever.

Based on opinions from external legal counsel, Fortis Board believes that the claims are without legal basis and are not tenable and accordingly, no provisions were required.

291 Financial Statements Notes to the Financial Statements

49. CONTINGENT LIABILITIES (continued) d) Fortis, having considered all necessary facts and taking into account external legal advice, had decided to treat as non-est the Letter of Appointment dated 27 September 2016, as amended, (“LOA”) issued to Malvinder Mohan Singh, the erstwhile Executive Chairman in relation to his appointment as “Lead: Strategic Initiatives” in the Strategy Functions. The external legal counsel has also advised that the payments made to him under this LOA would be considered to be covered under the limits of Section 197 of the Indian Companies Act, 2013.

In view of the above, Fortis has taken requisite action to recover the amounts paid to the erstwhile Executive Chairman during his tenure under the aforesaid LOA and certain additional amounts reimbursed in relation to expenses incurred (in excess of amounts approved by the Central Government under Section 197 of the Indian Companies Act 2013 for remuneration & other reimbursement), aggregating to INR200.2 million (equivalent to RM11.8 million).

The erstwhile Executive Chairman has claimed an amount of INR461.0 million (equivalent to RM27.1 million) from Fortis towards his terms of employment. Fortis Board has responded denying any liability whatsoever in this regards.

Fortis has also filed a complaint against the erstwhile Executive Chairman before the Economic Offence Wing, New Delhi in the above matter.

50. MATTERS ARISING FROM INVESTIGATIONS The Group completed its acquisition of Fortis Healthcare Limited (“Fortis”) and its subsidiaries (“Fortis Group”) in November 2018. Prior to this acquisition, an investigation report by an independent external legal firm was submitted to the former Fortis board and there are ongoing investigations on Fortis by the Securities and Exchange Board of India (“SEBI”) and the Serious Fraud Investigation Office (“SFIO”), Ministry of Corporate Affairs of India, both further explained below.

a) Independent investigation by external legal firm (prior to the acquisition of Fortis by IHH Group) The external legal firm’s significant findings revealed that the Fortis Group had made investment placements in the nature of inter-corporate deposits (“ICDs”) with three companies (“borrowing companies”) totalling INR4,450 million (equivalent to RM261.2 million) which were impaired in full in the financial statements for the year ended 31 March 2018 of Fortis Group. The Fortis Group is in the process of evaluating the legal alternatives available to recover the aforesaid balances and interest thereon. The report suggested that the ICDs were utilised by the borrowing companies (possible related parties of Fortis Group in substance) for granting/repayment of loans to certain entities whose former directors of Fortis are connected with the former controlling shareholders of Fortis.

Additionally, the placement of ICDs, their subsequent assignment and the cancellation of such assignment were done without following the normal treasury operations and treasury mandate of Fortis Group; and without specific authorisation by the former board of Fortis.

As disclosed in Note 49 – Contingent Liabilities, a third party (to whom the ICDs were previously assigned) filed a civil suit in February 2018 against various entities including Fortis and have, inter alia, claimed implied ownership of brands “Fortis”, “SRL” and “La-Femme”. In the suit, it claimed that consequent to a term sheet, Fortis is liable for claims due to the third party from a certain party, in addition to total claims of INR2,534 million (equivalent to RM148.8 million) and other claims by the said certain party. Based on advice from external legal counsel, Fortis believes that these claims are without legal basis and are not tenable and accordingly, no provisions were required. Whilst this legal matter was included as part of the terms of reference of the investigation, the merits of the case cannot be reported since the matter was sub-judice.

Fortis Group acquired 71% equity interest in Fortis Healthstaff Limited (“Fortis Healthcare”) at consideration of INR346,000 (equivalent to RM20,000), and 51% equity interest in Fortis Emergency Services Limited (“Fortis Emergency Services”) at consideration of INR25,000 (equivalent to RM1,500). Loans of INR79.45 million (equivalent to RM4.7million) and INR20.8 million (equivalent to RM1.2 million), were advanced to these newly-acquired subsidiaries to repay the outstanding unsecured loan amounts due to companies related to the former controlling shareholders of Fortis. The report suggested that the loan repayment and some other payments to companies connected to the former controlling shareholders of Fortis may have been ultimately routed through various intermediary companies and used for repayment of the ICDs/ vendor advance to Fortis Group.

292 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

50. MATTERS ARISING FROM INVESTIGATIONS (continued) b) Regulatory investigations (prior to the acquisition of Fortis by IHH Group) On 17 October 2018 and 21 December 2018, SEBI issued interim orders, indicating, amongst others, certain transactions were structured by some identified entities, which were prima facie fictitious and fraudulent in nature, resulting in, inter alia, diversion of funds from the Fortis Group for the ultimate benefit of former controlling shareholders of Fortis (and certain entities controlled by them) and misrepresentation in financial statements for the year ended 31 March 2018 of Fortis Group. Further, it issued certain interim directions, inter alia, directing Fortis shall take all necessary steps to recover INR4,030 million (equivalent to RM236.7 million), along with due interest, from former controlling shareholders of Fortis and various other entities identified in the orders.

The matter before SEBI is sub-judice and its investigation has not yet concluded.

Similarly, the investigation by the SFIO is ongoing. Fortis Group has been submitting all the information required by the various investigating agencies and is fully cooperating in the investigations/inquiries.

c) Actions taken by Fortis Group With respect to the above findings by the external legal firm, the Fortis Board has implemented specific improvement projects to strengthen the process and control environment. These include review and revision of operational and financial authority levels, greater oversight by Fortis Board, review and improve financial reporting processes, more robust secretarial documentation in regards to compliance to regulatory requirements and improving systems design and control enhancement. Accordingly, steps have been taken in relation to enhanced authority levels for payments/transfer of funds within Fortis Group, and review of borrowings above certain levels by the Fortis Board. Fortis Group had also disengaged itself from the former controlling shareholders. Fortis Board continues to evaluate other areas to strengthen processes and build a robust governance framework. The Fortis Board has initiated an enquiry of the management of the certain entities in the Fortis Group that were impacted in respect of the matters investigated by the external legal firm. To this end, Fortis Board will also initiate a forensic audit to ascertain the extent of diversion of funds from Fortis Group.

As per the directions from SEBI, Fortis Group has taken steps to recover dues from the former controlling shareholders of Fortis and various other entities. These include initiating civil actions against these entities demanding recovery of the outstanding amounts together with interest and to secure repayment of the outstanding amounts on the assets of these entities.

Based on the findings of investigations to-date, all identified/required adjustments/disclosures have been recorded in the financial statements of Fortis Group prior to the Group’s acquisition in November 2018. Any further adjustments/disclosures, if required, would be made in the financial statements of Fortis Group pursuant to the above actions to be taken by the internal/regulatory investigations, as and when the outcome of the above is known. Any consequential adjustments may be recorded either as adjustments to the assets acquired and liabilities assumed in the acquisition which will have an impact to the provisional goodwill recognised by the Group on acquisition of Fortis under the purchase price allocation exercise, or as post-acquisition adjustments to be recognised in the financial statements of the Group in the period the adjustments are known.

51. SUBSEQUENT EVENT On 15 January 2019, Fortis had completed the acquisition of the equity and other securities of the following entities from Fortis Global Healthcare Infrastructure Pte Ltd, the wholly-owned subsidiary of RHT Health Trust (an associate of the Group), for a total cash consideration of INR46,663 million (equivalent to RM2,740.0 million). Post completion of the acquisition, the following entities have become direct/indirect wholly-owned subsidiaries of Fortis and thus become indirect subsidiaries of the Company:

(i) International Hospitals Limited; (ii) Fortis Health Management Limited; (iii) Escorts Heart and Super Speciality Hospital Limited; (iv) Hospitalia Eastern Private Limited; and (v) Fortis Hospotel Limited.

293 Financial Statements Notes to the Financial Statements

52. SIGNIFICANT CHANGES IN ACCOUNTING POLICIES During the year, the Group and the Company adopted MFRS 15, Revenue from Contracts with Customers and MFRS 9, Financial Instruments on their financial statements. The Group and the Company generally applied the requirements of these accounting standards retrospectively with practical expedients and the transitional exemptions as allowed by the standards. Nevertheless, as permitted by MFRS 9, the Group and the Company have elected not to restate the comparatives.

Impacts on financial statements The application of MFRS 15 and MFRS 9 had no material impact on the financial statements of the Group and the Company.

Accounting for financial instruments a) Transition In adoption of MFRS 9, the following transitional exemptions as permitted by the standard have been adopted:

i) The Group and the Company have not restated comparative information for prior periods with respect to classification and measurement (including impairment) requirements. Difference in the carrying amounts of financial assets and financial liabilities resulting from the adoption of MFRS 9 are recognised in retained earnings and reserves as at 1 January 2018. Accordingly the information presented for 2017 does not generally reflect the requirements of MFRS 9, but rather those of MFRS 139, Financial Instruments: Recognition and Measurement.

ii) The following assessments have been made based on the facts and circumstances that existed at the date of initial application:

– The determination of the business model within which a financial asset is held;

– The designation and revocation of previous designation of certain financial assets and financial liabilities as measured at FVTPL; and

– The designation of certain investment in equity instruments not held for trading as at FVOCI.

iii) If an investment in a debt security had low credit risk at the date of initial application of MFRS 9, the Group has assumed that the credit risk on the asset had not increased significantly since its initial recognition.

iv) Loss allowance for receivables (other than trade receivables) is recognised at an amount equal to lifetime expected credit losses until the receivable is derecognised.

294 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

52. SIGNIFICANT CHANGES IN ACCOUNTING POLICIES (continued)

Accounting for financial instruments (continued) b) Classification of financial assets and financial liabilities on the date of initial application of MFRS 9 The following table show the measurement categories under MFRS 139 and the new measurement categories under MFRS 9 for each class of the Group’s and the Company’s financial assets and liabilities as at 1 January 2018.

1 January 2018 Reclassification to new MFRS 9 category Derivatives 31 December Mandatorily FVOCI-equity used for Category under MFRS 139 2017 AC at FVTPL instruments hedging Group RM’000 RM’000 RM’000 RM’000 RM’000 Financial assets Loans and receivables Amount due from a joint venture 19,710 19,710 – – – Trade and other receivables(1) 1,429,526 1,429,526 – – – Cash and bank balances 6,078,603 6,078,603 – – – Other financial assets –– Fixed deposits 163,558 163,558 – – – Derivative assets –– Put option 1,625 – 1,625 – – 7,693,022 7,691,397 1,625 – –

Available-for-sale Equity instruments 11,385 – – 11,385 –

Derivatives used for hedging Cross currency interest swap 5,036 – – – 5,036

FVTPL Derivative asset –– Foreign exchange forward contracts 19,167 – 19,167 – –

Financial liabilities Financial liabilities measured at amortised cost Trade and other payables(2) (2,458,444) (2,458,444) – – – Loans and borrowings (7,638,040) (7,638,040) – – – Bank overdrafts (68) (68) – – – (10,096,552) (10,096,552) – – –

FVTPL CCPS liabilities (93,185) – (93,185) – – Derivative liabilities –– Call option (22,493) – (22,493) – – (115,678) – (115,678) – –

Derivatives used for hedging Interest rate swaps (4,240) – – – (4,240)

1 Excludes prepayments 2 Excludes deposits, rental advance billings, put option liabilities and CCPS liabilities

295 Financial Statements Notes to the Financial Statements

52. SIGNIFICANT CHANGES IN ACCOUNTING POLICIES (continued) Accounting for financial instruments (continued) b) Classification of financial assets and financial liabilities on the date of initial application of MFRS 9 (continued)

1 January 2018 Reclassification to new MFRS 9 category Derivatives 31 December Mandatorily FVOCI-equity used for Category under MFRS 139 2017 AC at FVTPL instruments hedging Company RM’000 RM’000 RM’000 RM’000 RM’000 Financial assets Loans and receivables Trade and other receivables(1) 2,266 2,266 – – – Amounts due from subsidiaries 14,848 14,848 – – – Cash and cash equivalents 1,564,893 1,564,893 – – – 1,582,007 1,582,007 – – –

Financial liabilities Financial liabilities measured at amortised cost Trade and other payables(2) (7,605) (7,605) – – – Amounts due to subsidiaries (814) (814) – – – (8,419) (8,419) – – –

1 Excludes prepayments 2 Excludes deposits, rental advance billings, put option liabilities and CCPS liabilities

296 IHH Healthcare Berhad | Annual Report 2018 Financial StatementsFinancial

53. COMPARATIVE INFORMATION – GROUP During the year, the Group reclassified certain balances from interest in associates and interest in joint ventures upon adoption of MFRS 9, Financial Instruments. Other balances were also reclassified to more appropriately reflect the nature of the balances. Comparative amounts in the statements of financial position were restated to conform with current year’s presentation. The reclassifications did not have any effect on the statements of comprehensive income and cash flows.

The effects of the reclassification are set out below:

As previously reported Reclassification Restated RM’000 RM’000 RM’000 Statement of financial position Group 31 December 2017 Non-current assets Interests in associates 7,632 813 8,445 Interests in joint ventures 153,970 (14,852) 139,118

Current assets Trade and other receivables 1,489,590 15,292 1,504,882

Non-current liabilities Loans and borrowings 6,103,785 844,268 6,948,053 Employee benefits 45,590 6,852 52,442 Trade and other payables 1,814,177 (844,268) 969,909

Current liabilities Employee benefits 83,954 10,079 94,033 Trade and other payables 2,811,505 (15,678) 2,795,827

297 Additional Corporate Information ANALYSIS OF SHAREHOLDINGS As at 29 March 2019

Class of securities : Ordinary shares

Issued share capital : 8,769,296,463 ordinary shares

Voting right : One vote per ordinary share

DISTRIBUTION OF SHAREHOLDINGS

Size of Shareholdings No. of Holders % No. of Holdings % Less than 100 175 2.34 1,745 0.00 100 – 1,000 2,119 28.35 1,672,133 0.02 1,001 – 10,000 3,491 46.71 15,404,096 0.18 10,001 – 100,000 975 13.05 30,036,727 0.34 100,001 – 438,464,822* 710 9.50 2,377,285,868 27.11 438,464,823 and above** 4 0.05 6,344,895,894 72.35 Total 7,474 100.00 8,769,296,463 100.00

Notes: * Less than 5% of issued share capital ** 5% and above of issued share capital

CATEGORY OF SHAREHOLDERS No. of % of No. of % of Issued Category of Shareholders Shareholders Shareholders Shares held Shares Individual 5,577 74.62 30,239,081 0.34 Banks/Finance Companies 71 0.95 833,766,100 9.51 Investments Trusts/Foundations/Charities 1 0.01 100,000 0.00 Other Types of Companies 87 1.17 5,184,077,858 59.12 Government Agencies/Institutions 1 0.01 375,700 0.00 Nominees 1,737 23.24 2,720,737,724 31.03 Others 0 0.00 0 0.00 Total 7,474 100.00 8,769,296,463 100.00

298 IHH Healthcare Berhad | Annual Report 2018 SUBSTANTIAL SHAREHOLDERS (As per Register of Substantial Shareholders)

Direct Interest Indirect Interest Additional Corporate Information No. of % of Issued No. of % of Issued No. Name Shares held Shares Shares held Shares 1. Mitsui & Co., Ltd 2,888,487,400 32.94 – – 2. Pulau Memutik Ventures Sdn Bhd 2,284,536,356 26.05 – – 3. Khazanah Nasional Berhad – – 2,284,536,356 i 26.05 4. Employees Provident Fund Board 654,367,400 ii 7.46 – – 5. Mehmet Ali Aydinlar 420,244,132 4.79 107,319,041iii 1.22

Notes: i Deemed interest by virtue of its shareholding in Pulau Memutik Ventures Sdn Bhd pursuant to Section 8 of the Companies Act 2016. ii The shares are held through various nominees companies. iii Deemed interest by virtue of his wife, Hatice Seher Aydinlar’s shareholding in the Company and SZA Gayrimenkul Yatırım İnşaat ve Ticaret A.Ş.’s shareholding in the Company, a company wholly-owned by Mehmet Ali Aydinlar and his wife, pursuant to Section 8 of the Companies Act 2016.

DIRECTORS’ DIRECT AND INDIRECT INTERESTS IN THE COMPANY AND ITS RELATED CORPORATIONS (As per Register of Directors’ Shareholdings) Number of ordinary shares Direct Interest Indirect Interest No. of % of Issued No. of % of Issued No. Interest in the Company Shares held Shares Shares held Shares 1. Dr Tan See Leng 2,863,300 0.03 – – 2. Mehmet Ali Aydinlar 420,244,132 4.79 107,319,041 i 1.22 3. Chang See Hiang 100,000 0.00 – –

Note: i Deemed interest by virtue of his wife, Hatice Seher Aydinlar’s shareholding in the Company and SZA Gayrimenkul Yatırım İnşaat ve Ticaret A.Ş.’s shareholding in the Company, a company wholly-owned by Mehmet Ali Aydinlar and his wife, pursuant to Section 8 of the Companies Act 2016.

299 Additional Corporate Information ANALYSIS OF SHAREHOLDINGS As at 29 March 2019

DIRECTORS’ DIRECT AND INDIRECT INTERESTS IN THE COMPANY AND ITS RELATED CORPORATIONS (As per Register of Directors’ Shareholdings) (continued)

Mehmet Ali Aydinlar’s direct and/or indirect interest in the subsidiaries are as follows: Number of ordinary shares of TL1.00 each Direct Interest Indirect Interest No. of % of Issued No. of % of Issued Interest in subsidiaries Shares held Shares Shares held Shares Acibadem Saglik Yatirimlari Holding A.S. 141,813,235 9.28 10,986,766 0.72 Acibadem Saglik Hizmetleri ve Ticaret A.S. 1 0.00 1 0.00 Acibadem Poliklinikleri A.S. 1 0.00 3 0.00 Acibadem Proje Yonetimi A.S. 1 0.00 – – Aplus Hastane Otelcilik Hizmetleri A.S. 1 0.00 2 0.00

Number of ordinary shares of TL2.00 each Direct Interest Indirect Interest No. of % of Issued No. of % of Issued Shares held Shares Shares held Shares International Hospital İstanbul A.S. 1 0.00 1 0.00

Chang See Hiang’s direct interest in the subsidiary is as follows: Number of units Direct Interest Indirect Interest No. of % of Issued No. of % of Issued Interest in subsidiary Units held Units Units held Units Parkway Life Real Estate Investment Trust 300,000 0.05 – –

Shirish Moreshwar Apte’s direct interest in the subsidiary is as follows: Number of units Direct Interest Indirect Interest No. of % of Issued No. of % of Issued Interest in subsidiary Units held Units Units held Units Parkway Life Real Estate Investment Trust 150,000 0.02 – –

Dr Tan See Leng’s direct interest in the subsidiary is as follows: USD500 million 4.25% Senior Perpetual Securities Direct Interest Value of Securities held Interest in subsidiary USD’000 Parkway Pantai Limited 3,000

300 IHH Healthcare Berhad | Annual Report 2018 DIRECTORS’ DIRECT AND INDIRECT INTERESTS IN THE COMPANY AND ITS RELATED CORPORATIONS (As per Register of Directors’ Shareholdings) (continued)

Additional Corporate Information Long Term Incentive Plan Number of units convertible into ordinary shares Direct Interest No. of No. Interest in the Company Units held 1. Dr Tan See Leng 1,308,000 2. Mehmet Ali Aydinlar 665,000

Enterprise Option Scheme Number of options convertible into ordinary shares Direct Interest No. of No. Interest in the Company Options held 1. Dr Tan See Leng 20,661,000 2. Mehmet Ali Aydinlar 2,283,000

Save as disclosed above, none of the Directors of the Company has any interest, direct or indirect in the Company and its related corporations.

301 Additional Corporate Information LIST OF TOP 30 LARGEST SHAREHOLDERS As at 29 March 2019

No. of % of Issued No. Name Shares held Shares 1. Mitsui & Co., Ltd 2,888,487,400 32.94

2. Pulau Memutik Ventures Sdn Bhd 2,284,536,356 26.05

3. Citigroup Nominees (Asing) Sdn Bhd 661,919,938 7.55 Exempt AN for The Central Depository (Pte) Limited

4. Citigroup Nominees (Tempatan) Sdn Bhd 509,952,200 5.82 Employees Provident Fund Board

5. Amanahraya Trustees Berhad 226,588,600 2.58 Amanah Saham Bumiputera

6. DB (Malaysia) Nominee (Asing) Sdn Bhd 144,136,900 1.64 BNYM SA/NV for Kuwait Investment Authority

7. Kumpulan Wang Persaraan (Diperbadankan) 139,752,900 1.59

8. Cartaban Nominees (Asing) Sdn Bhd 98,960,575 1.13 Exempt AN for State Street Bank & Trust Company (West CLT OD67)

9. Cartaban Nominees (Asing) Sdn Bhd 91,514,800 1.04 GIC Private Limited for Government of Singapore (C)

10. Maybank Nominees (Tempatan) Sdn Bhd 65,000,000 0.74 Maybank Trustees Berhad for Public Ittikal Fund (N14011970240)

11. Amanahraya Trustees Berhad 63,399,400 0.72 Amanah Saham Malaysia

12. Permodalan Nasional Berhad 51,622,000 0.59

13. HSBC Nominees (Asing) Sdn Bhd 47,676,300 0.54 BBH and Co Boston for Matthews Pacific Tiger Fund

14. HSBC Nominees (Asing) Sdn Bhd 46,345,857 0.53 JPMCB NA for Vanguard Total International Stock Index Fund

15. HSBC Nominees (Asing) Sdn Bhd 44,832,875 0.51 JPMCB NA for Vanguard Emerging Markets Stock Index Fund

302 IHH Healthcare Berhad | Annual Report 2018 No. of % of Issued No. Name Shares held Shares

16. Amanahraya Trustees Berhad 43,800,000 0.50 Additional Corporate Information Amanah Saham Bumiputera 2

17. Amanahraya Trustees Berhad 40,215,400 0.46 Amanah Saham Malaysia 3

18. Amanahraya Trustees Berhad 40,024,400 0.46 Public Islamic Dividend Fund

19. Cartaban Nominees (Tempatan) Sdn Bhd 34,876,100 0.40 PAMB for Prulink Equity Fund

20. HSBC Nominees (Asing) Sdn Bhd 31,984,000 0.36 JPMCB NA for New World Fund, Inc.

21. Citigroup Nominees (Tempatan) Sdn Bhd 29,158,100 0.33 Employees Provident Fund Board (Nomura)

22. Amanahraya Trustees Berhad 28,839,900 0.33 Amanah Saham Malaysia 2 – Wawasan

23. Amanahraya Trustees Berhad 25,393,600 0.29 Amanah Saham Bumiputera 3 – Didik

24. Citigroup Nominees (Tempatan) Sdn Bhd 22,771,800 0.26 Exempt AN for AIA Bhd.

25. HSBC Nominees (Asing) Sdn Bhd 22,188,000 0.25 TNTC for Fidelity Series Emerging Markets Opportunities Fund (FID INV TST)

26. Maybank Nominees (Tempatan) Sdn Bhd 21,705,000 0.25 Maybank Trustees Berhad for Public Regular Savings Fund (N14011940100)

27. Amanahraya Trustees Berhad 21,295,400 0.24 Public Islamic Equity Fund

28. Amanahraya Trustees Berhad 18,867,200 0.22 Public Ittikal Sequel Fund

29. Amanahraya Trustees Berhad 18,400,000 0.21 Public Islamic Sector Select Fund

30. Citigroup Nominees (Tempatan) Sdn Bhd 17,883,400 0.20 Great Eastern Life Assurance (Malaysia) Berhad (PAR 1)

Total 7,782,128,401 88.73

303 Additional Corporate Information LIST OF TOP 10 PROPERTIES for the Financial Year Ended 31 December 2018

Freehold/ Net Book Leasehold Year of Built-up Approximate Value @ Land and/or Expiry of Land /Strata Existing Age of 31 December No. Address Buildings Lease Area Area Use Buildings 2018 Sq m Sq m Years RM’000

SINGAPORE 1. Leasehold 2108 N/A Strata Hospital 5 3,970,091a Mount Elizabeth Novena Hospital land and area: building and Medical Centre Units building 56,361 and 38 Irrawaddy Road medical Singapore 329563 centre

2. Leasehold 2075 N/A Strata Hospital 39 1,440,521a,b Mount Elizabeth Hospital and land and area: building Medical Centre Units building 58,290 and 3 Mount Elizabeth medical Singapore 228510 centre

3. Gleneagles Hospital and Medical Freehold – N/A Strata Hospital 27 698,714a,b Centre Units land and area: building 6 Napier Road, Singapore 258499; building 49,003 and A Napier Road, Singapore 258500 medical centre

MALAYSIA

4. Gleneagles Medini Hospital Leasehold 2107 72,313 Built-up Hospital 3 388,658a Plot A25 under HSD478967, land and area: building PT 170682, Medini Iskandar building 59,388 and Malaysia, Johor medical centre; Includes a plot of land held as investment property

5. Pantai Hospital Kuala Lumpur Leasehold 2111 22,533 Built-up Hospital 14 years 302,595b 8 Jalan Bukit Pantai land and area: building for original 59100 Kuala Lumpur building 132,711 block; 4 years and 3 years for extension blocks

Notes: a Carrying value includes fair value of investment properties, which were revalued in 2018 in accordance with the Group’s accounting policies. b Properties were revalued in 2010 pursuant to a purchase price allocation performed upon acquisition of Parkway Group.

304 IHH Healthcare Berhad | Annual Report 2018 Freehold/ Net Book Leasehold Year of Built-up Approximate Value @ Land and/or Expiry of Land /Strata Existing Age of 31 December

No. Address Buildings Lease Area Area Use Buildings 2018 Additional Corporate Information Sq m Sq m Years RM’000

HONG KONG 6. Gleneagles Hong Kong Hospital Leasehold 2063 27,500 Built-up Hospital 1 1,238,343 1 Nam Fung Path building area: building Wong Chu Hang 46,750 Hong Kong

INDIA 7. Fortis Memorial Research Freehold – 43,300 Built-up Hospital 7 495,662c Institute, Gurgaon land and area: building Sector 44, Opposite HUDA City building 66,065 Centre Metro Station, Gurugram, Haryana - 122002

8. Shalimar Bagh, New Delhi Leasehold 2095 29,703 Built-up Hospital 8 368,102c A Block, Shalimar Bagh, land and area: building New Delhi - 110088 building 36,105

9. Continental Hospitals Freehold – 11,938 Built-up Hospital 5 253,296d Plot No.3, Road No.2, IT & Financial land and area: building District, Nanakramguda, building 120,242 Gachibowli, Hyderabad, 500 032, India

BULGARIA 10. Bulgaria Tokuda Hosital Freehold – 27,000 Built-up Hospital 12 years 250,821 bul. “Nikola Y. Vaptsarov” 51Б, land and area: building for original 1407 Sofia, Bulgaria building 51,138 block and 10 years for extension blocks

Notes: c Properties were revalued in 2016, prior to the Group’s acquisition for Fortis Group on 13 November 2018. Properties will be revalued pursuant to an ongoing purchase price allocation performed upon acquisition of Fortis Group. d Properties were revalued in 2015 pursuant to a purchase price allocation performed upon acquisition of Continental Hospitals.

305 Additional Corporate Information NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Ninth Annual General Meeting of IHH HEALTHCARE BERHAD (“IHH” or “the Company”) will be held at Ballroom A & B, Level 6, Hilton Hotel KL Sentral, 3 Jalan Stesen Sentral, 50470 Kuala Lumpur, Wilayah Persekutuan, Malaysia on Tuesday, 28 May 2019 at 10.00 a.m. for the following purposes:

AGENDA

1. To receive the Audited Financial Statements for the financial year ended 31 December 2018 together with the Reports of the Directors and Auditors thereon.

2. To approve the payment of a first and final single tier cash dividend of 3 sen per ordinary share for the Ordinary Resolution 1 financial year ended 31 December 2018.

3. To re-elect the following Directors who retire pursuant to Article 113(1) of the Constitution of the Company: i. Dato’ Mohammed Azlan bin Hashim Ordinary Resolution 2 ii. Bhagat Chintamani Aniruddha Ordinary Resolution 3 iii. Koji Nagatomi Ordinary Resolution 4

4. To re-elect Takeshi Saito who retires pursuant to Article 120 of the Constitution of the Company. Ordinary Resolution 5

5. To approve the payment of the following fees and other benefits payable to the Directors of Ordinary Resolution 6 the Company by the Company: i. Directors’ fees to the Non-Executive Directors in respect of their directorship and committee membership in the Company with effect from 1 July 2019 until 30 June 2020 as per the table below:

Chairman Member Structure (RM per annum) (RM per annum) Board of Directors 600,000 285,000 Audit Committee 175,000 100,000 Risk Management Committee 175,000 100,000 Nomination Committee 150,000 90,000 Remuneration Committee 150,000 90,000 Steering Committee 350,000 100,000

ii. Any other benefits provided to the Directors of the Company by the Company with effect from 1 July 2019 until 30 June 2020, subject to a maximum amount equivalent to RM1,000,000.

306 IHH Healthcare Berhad | Annual Report 2018 6. To approve the payment of the Directors’ fees (or its equivalent amount in Ringgit Malaysia as Ordinary Resolution 7 converted using the middle rate of Bank Negara Malaysia foreign exchange on the payment dates, where applicable) to the Directors of the Company who are holding directorship and committee membership in the following Company’s subsidiaries and other benefits payable to the Directors of Additional Corporate Information the Company by the Company’s subsidiaries:

i. Fortis Healthcare Limited for the period with effect from 13 November 2018 (being the date which Fortis Healthcare Limited became a subsidiary of the Company) to 30 June 2020 as per below:

Chairman/Member Structure (INR per meeting attended) Board of Directors 100,000 Audit and Risk Management Committee 100,000 Nomination and Remuneration Committee 100,000 Corporate Social Responsibility Committee 100,000 Stakeholders Relationship Committee 100,000 Finance Committee 100,000 Independent Directors 100,000

ii. Parkway Trust Management Limited for the period with effect from 1 January 2019 to 30 June 2020 as per below:

Chairman Member Structure (SGD per annum) (SGD per annum) Board of Directors 100,000 50,000 Audit Committee 33,000 10,000 Nominating and Remuneration Committee 27,000 9,000

iii. (a) Acibadem Saglik Yatirimlari Holding A.S. (“ASYH”) Group for the period with effect from 1 July 2019 to 30 June 2020 as per below:

Chairman Member Structure (USD per annum) (USD per annum) Board of Directors – 40,000 Audit and Risk Management Committee 30,000 10,000 Nomination and Remuneration Committee 25,000 10,000

(b) ASYH for the period with effect from 1 March 2019 to 30 June 2020, for the Board fee of USD513,000 per annum payable to Mehmet Ali Aydinlar as the Board Chairman and Director in ASYH Group.

iv. Any other benefits provided to the Directors of the Company by the subsidiaries with effect from 1 July 2019 until 30 June 2020, subject to a maximum amount equivalent to RM300,000.

7. To re-appoint KPMG PLT as Auditors of the Company and to authorise the Directors to fix their Ordinary Resolution 8 remuneration.

307 Additional Corporate Information NOTICE OF ANNUAL GENERAL MEETING

AS SPECIAL BUSINESS

To consider and if thought fit, pass the following resolutions:

8. AUTHORITY TO ALLOT SHARES PURSUANT TO SECTION 75 OF THE COMPANIES ACT Ordinary Resolution 9 2016 “THAT subject to the Companies Act 2016 (the “Act”), the Constitution of the Company and the approvals from Bursa Malaysia Securities Berhad and other relevant governmental and/or regulatory authorities, the Directors be and are hereby empowered, pursuant to Section 75 of the Act, to issue shares in the Company from time to time and upon such terms and conditions and for such purposes as the Directors may deem fit provided that the aggregate number of shares to be issued pursuant to this Resolution in any one financial year does not exceed ten percent (10%) of the total number of issued shares of the Company for the time being and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.”

9. PROPOSED ALLOCATION OF UNITS UNDER THE LONG TERM INCENTIVE PLAN (“LTIP”) OF Ordinary Resolution 10 THE IHH GROUP AND ISSUANCE OF NEW ORDINARY SHARES IN IHH (“IHH SHARES”) TO DR TAN SEE LENG “THAT approval be and is hereby given for the Directors of the Company at any time and from time to time, commencing from the date of the shareholders’ approval (“Approval Date”) and expiring at the conclusion of the annual general meeting of the Company commencing next after the Approval Date or the expiration of the period within which the next annual general meeting of the Company is required to be held, to allocate, grant and subsequently vest such number of units as the same may be allocated, granted and vested to Dr Tan See Leng, the Managing Director and Chief Executive Officer of the Company, under any of the LTIPs of the IHH Group, and to allot and issue a corresponding number of new IHH Shares to him upon the surrender of such units to the Company, as part of the compensation package for his services to the Company and/or its group of companies, PROVIDED THAT the total allocation will be based on the aggregate value of Singapore Dollar 3,076,592 or its equivalent amount in Ringgit Malaysia as converted using the middle rate of Bank Negara Malaysia foreign exchange on the issue date (“Base Allocation”), equivalent to the total number of units that may be granted and vested or the corresponding number of IHH Shares that may be allotted and issued within that Base Allocation (“Base Number”) at the issue price per unit/IHH Share to be determined based on the five (5)-day weighted average market price of IHH Shares as traded on Bursa Malaysia Securities Berhad prior to the issue date (“Issue Price”), PROVIDED FURTHER THAT if the Base Number contains a fractional part of a thousand, the actual number of units that may be granted and vested or the corresponding number of IHH Shares that may be allotted and issued (“Actual Number”) will be rounded-up to the nearest thousand notwithstanding that the total value of the Actual Number may exceed the Base Allocation based on the Issue Price, AND PROVIDED ALWAYS THAT the Proposed Allocation shall be subject to the terms and conditions and/or adjustments which may be made in accordance with the provisions of the respective Bye Laws for the LTIP.”

308 IHH Healthcare Berhad | Annual Report 2018 10. PROPOSED ALLOCATION OF UNITS UNDER THE LONG TERM INCENTIVE PLAN (“LTIP”) OF Ordinary Resolution 11 THE IHH GROUP AND ISSUANCE OF NEW ORDINARY SHARES IN IHH (“IHH SHARES”) TO MEHMET ALI AYDINLAR Additional Corporate Information “THAT approval be and is hereby given for the Directors of the Company at any time and from time to time, commencing from the date of the shareholders’ approval (“Approval Date”) and expiring at the conclusion of the annual general meeting of the Company commencing next after the Approval Date or the expiration of the period within which the next annual general meeting of the Company is required to be held, to allocate, grant and subsequently vest such number of units as the same may be allocated, granted and vested to Mehmet Ali Aydinlar, a Non-Independent Non-Executive Director of the Company (re-designated from Executive Director with effect from 1 March 2019), under any of the LTIPs of the IHH Group, and to allot and issue a corresponding number of new IHH Shares to him upon the surrender of such units to the Company, as part of the compensation package for his services to the Company and/or its group of companies, PROVIDED THAT the total allocation will be based on the aggregate value of United States Dollar 1,000,000 or its equivalent amount in Ringgit Malaysia as converted using the middle rate of Bank Negara Malaysia foreign exchange on the issue date (“Base Allocation”), equivalent to the total number of units that may be granted and vested or the corresponding number of IHH Shares that may be allotted and issued within that Base Allocation (“Base Number”) at the issue price per unit/IHH Share to be determined based on the five (5)-day weighted average market price of IHH Shares as traded on Bursa Malaysia Securities Berhad prior to the issue date (“Issue Price”), PROVIDED FURTHER THAT if the Base Number contains a fractional part of a thousand, the actual number of units that may be granted and vested or the corresponding number of IHH Shares that may be allotted and issued (“Actual Number”) will be rounded-up to the nearest thousand notwithstanding that the total value of the Actual Number may exceed the Base Allocation based on the Issue Price, AND PROVIDED ALWAYS THAT the Proposed Allocation shall be subject to the terms and conditions and/or adjustments which may be made in accordance with the provisions of the respective Bye Laws for the LTIP.”

309 Additional Corporate Information NOTICE OF ANNUAL GENERAL MEETING

11. PROPOSED RENEWAL OF AUTHORITY FOR IHH TO PURCHASE ITS OWN SHARES OF UP Ordinary Resolution 12 TO TEN PERCENT (10%) OF THE PREVAILING TOTAL NUMBER OF ISSUED SHARES OF THE COMPANY (“PROPOSED RENEWAL OF SHARE BUY-BACK AUTHORITY”) “THAT subject to the Companies Act 2016 (the “Act”), rules, regulations and orders made pursuant to the Act, the provisions of the Company’s Constitution and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) (“Listing Requirements”) and the approvals of all relevant governmental and/or relevant authorities, the Company be and is hereby authorised, to the extent permitted by law, to purchase and/or hold such amount of ordinary shares in the Company as may be determined by the Directors of the Company from time to time through Bursa Securities upon such terms and conditions as the Directors may deem fit and expedient in the best interest of the Company provided that: i. the aggregate number of shares which may be purchased (“Purchased Shares”) and/or held as treasury shares pursuant to this ordinary resolution does not exceed ten percent (10%) of the prevailing total number of issued shares of the Company at the point of purchase; ii. the maximum funds to be allocated for the Company to purchase its own shares pursuant to the Proposed Renewal of Share Buy-Back Authority shall not exceed the retained profits of the Company; iii. upon completion of the purchase by the Company of its own shares, the Directors of the Company be and are hereby authorised, at their discretion, to deal with the Purchased Shares in the following manner as may be permitted by the Act, rules, regulations, guidelines, requirements and/or orders of Bursa Securities and any other relevant authorities for the time being in force:

a. cancel all or part of the Purchased Shares; and/or b. retain all or part of the Purchased Shares as treasury shares (as defined in Section 127 of the Act); and/or c. resell the treasury shares on Bursa Securities in accordance with the relevant rules of Bursa Securities; and/or d. distribute the treasury shares as share dividends to the shareholders of the Company; and/or e. transfer the treasury shares for the purposes of or under the employees’ share scheme established by the Group; and/or f. transfer the treasury shares as purchase consideration; and/or g. sell, transfer or otherwise use the treasury shares for such other purposes as the Minister may by order prescribe,

or in any other manner as may be prescribed by the Act, the applicable laws, regulations and guidelines applied from time to time by Bursa Securities and/or any other relevant authority for the time being in force and that the authority to deal with the Purchased Shares shall continue to be valid until all the Purchased Shares have been dealt with by the Directors. THAT the authority conferred by this ordinary resolution shall be effective immediately upon passing of this ordinary resolution and shall continue to be in force until: i. the conclusion of the next Annual General Meeting (“AGM”) of the Company at which time the authority shall lapse unless by ordinary resolution passed at that AGM, the authority is renewed, either unconditionally or subject to conditions; ii. the expiration of the period within which the next AGM of the Company is required by law to be held; or iii. revoked or varied by ordinary resolution passed by the shareholders of the Company at a general meeting, whichever occurs first, but shall not prejudice the completion of purchase(s) by the Company before the aforesaid expiry date and, in any event, in accordance with the provisions of the Listing Requirements and any other relevant authorities.

310 IHH Healthcare Berhad | Annual Report 2018 AND THAT the Directors of the Company be and are hereby empowered to do all acts and things (including the opening and maintaining of a central depositories account(s) under the Securities Industry (Central Depositories) Act, 1991) and to take all such steps and to enter into and execute all declarations, commitments, transactions, deeds, agreements, arrangements, undertakings, Additional Corporate Information indemnities, transfers, assignments and/or guarantees as they may deem fit, necessary, expedient and/or appropriate in the best interest of the Company in order to implement, finalise and give full effect to the Proposed Renewal of Share Buy-Back Authority with full powers to assent to any conditions, modifications, variations (if any) as may be imposed by the relevant authorities.”

12. PROPOSED ADOPTION OF A NEW CONSTITUTION OF THE COMPANY IN PLACE OF THE Special Resolution 1 EXISTING CONSTITUTION (“PROPOSED NEW CONSTITUTION”) “THAT approval be and is hereby given for the Company to adopt the new Constitution in the form and manner as set out in Appendix IV of the Circular to Shareholders dated 29 April 2019, in place of the existing Constitution AND THAT the Board of Directors of the Company be and is hereby authorised to assent to any modifications, variations and/or amendments as may be required by any relevant authorities and to do all acts necessary to give effect to the Proposed New Constitution.”

13. To transact any other business of which due notice shall have been given.

NOTICE ON DIVIDEND ENTITLEMENT AND PAYMENT NOTICE IS ALSO HEREBY GIVEN THAT a first and final single tier cash dividend of 3 sen per ordinary share for the financial year ended 31 December 2018 (“Dividend”), if approved by the shareholders at the forthcoming Ninth Annual General Meeting, will be paid on 18 July 2019 to depositors whose names appear in the Record of Depositors on 28 June 2019.

A depositor shall qualify for entitlement to the Dividend only in respect of: a. shares transferred into the Depositor’s securities account before 4.00 p.m. on 28 June 2019 in respect of transfers; and b. shares bought on the Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of the Bursa Malaysia Securities Berhad.

BY ORDER OF THE BOARD

SEOW CHING VOON (MAICSA 7045152) Company Secretary

Kuala Lumpur 29 April 2019

311 Additional Corporate Information NOTICE OF ANNUAL GENERAL MEETING

NOTES: 6. The instrument appointing the proxy together with the PROXY AND/OR AUTHORISED REPRESENTATIVES Authorisation Document or the duly registered Power of Attorney referred to in Note 4 above, if any, must be 1. A member entitled to attend and vote at the above Meeting deposited at the office of the Share Registrar, Boardroom is entitled to appoint a proxy or proxies to exercise all or Share Registrars Sdn Bhd (formerly known as Symphony any of his rights to attend, participate, speak and vote in Share Registrars Sdn Bhd) at Level 6, Symphony House, his/her stead. Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia not less than forty- 2. Where a member of the Company is an exempt authorised eight (48) hours before the time appointed for holding of nominee which holds shares in the Company for multiple the Meeting or at any adjournment thereof. beneficial owners in one securities account (“omnibus account”) as defined under the Securities Industry (Central 7. Personal data privacy Depositories) Act, 1991, there is no limit to the number of By submitting an instrument appointing a proxy(ies) and/or proxies which the exempt authorised nominee may appoint representative(s) to attend, speak and vote at the above in respect of each omnibus account it holds. Meeting and/or any adjournment thereof, a member of the 3. A member other than an exempt authorised nominee shall Company (i) consents to the collection, use and disclosure be entitled to appoint not more than two (2) proxies to of the member’s personal data by the Company (or its attend and vote at the same meeting. Notwithstanding the agents) for the purpose of the processing and administration foregoing, any member other than an exempt authorised by the Company (or its agents) of proxies and representatives nominee who is also a substantial shareholder (within the appointed for the above Meeting (including any adjournment meaning of the Companies Act 2016) shall be entitled to thereof) and the preparation and compilation of the appoint up to (but not more than) five (5) proxies. Where attendance lists, minutes and other documents relating to such member appoints more than one (1) proxy, the the above Meeting (including any adjournment thereof), appointment shall be invalid unless the percentage of the and in order for the Company (or its agents) to comply with shareholding to be represented by each proxy is specified. any applicable laws, listing rules, regulations and/or guidelines (collectively, the “Purposes”), (ii) warrants that 4. The instrument appointing a proxy shall: where the member discloses the personal data of the member’s proxy(ies) and/or representative(s) to the i. in the case of an individual, be signed by the appointer Company (or its agents), the member has obtained the prior or by his/her attorney. consent of such proxy(ies) and/or representative(s) for the ii. in the case of corporation, be either under its common collection, use and disclosure by the Company (or its seal or signed by its attorney or an officer on behalf of agents) of the personal data of such proxy(ies) and/or the corporation. representative(s) for the Purposes, and (iii) agrees that the member will indemnify the Company in respect of any A copy of the Authorisation Document or the duly registered penalties, liabilities, claims, demands, losses and damages Power of Attorney, which should be valid in accordance as a result of the member’s breach of warranty. with the laws of the jurisdiction in which it was created and exercised, should be enclosed with the proxy form. 8. Members entitled to attend Only Members whose names appear in the General 5. A corporation which is a member, may by resolution of its Meeting Record of Depositors on 21 May 2019 shall be Directors or other governing body authorise such person entitled to attend, speak and vote at this Ninth Annual as it thinks fit to act as its representative at the Meeting, General Meeting of the Company or appoint a proxy(ies) on in accordance with the Company’s Constitution. his/her behalf.

312 IHH Healthcare Berhad | Annual Report 2018 EXPLANATORY NOTES ON SPECIAL BUSINESS: Maximum Number and Basis of Allocation The actual number of LTIP units to be granted to the 1. Resolution pursuant to Section 75 of the Companies Act 2016 Directors of the Company will be determined at the sole Additional Corporate Information The proposed Ordinary Resolution 9 is a renewal of the and absolute discretion of the Board after taking into general mandate for issuance of shares by the Company account their performance in the Company or its group of under Section 75 of the Companies Act 2016 (“General companies or such other matters which the Board may in Mandate”). The General Mandate, if passed, will empower their sole discretion deem fit. In respect of the Proposed the Directors to issue shares in the Company up to an Allocation, upon considering the actual performance of the amount of not exceeding in total ten percent (10%) of the Company, Acibadem Saglik Yatirimlari Holding A.S. and its total number of issued shares of the Company for any group of companies for the financial year ended 2018, the possible fund raising activities, funding investment Board recommends the total allocation to the Directors project(s), working capital or such purposes as the Directors based on the aggregate value in the currency applicable in consider would be in the interest of the Company. The the jurisdiction each Director is based in to be converted approval is sought to avoid any delay and cost in convening using the middle rate of Bank Negara Malaysia foreign separate general meetings for such issuance of shares. exchange on the issue date (“Base Allocation”) which will This authority, unless revoked or varied at a general be equivalent to the total number of units that may be meeting will expire at the next annual general meeting of granted and vested or the corresponding number of IHH the Company. Shares that may be allotted and issued within that Base Allocation (“Base Number”) based on issue price per unit/ The Company had, during its Eighth Annual General IHH Share to be determined based on the five (5)-day Meeting held on 28 May 2018, obtained its shareholders’ weighted average market price of IHH Shares as traded on approval for the General Mandate. No share was issued Bursa Securities prior to the issue date (“Issue Price”), pursuant to the General Mandate as at the date of provided that if the Base Number contains a fractional part this Notice. of a thousand, the actual number of units that may be granted and vested or the corresponding number of IHH 2. Resolutions pursuant to the proposed allocation of units Shares that may be allotted and issued (“Actual Number”) under the Long Term Incentive Plan (“LTIP”) of the IHH will be rounded-up to the nearest thousand notwithstanding Group and issuance of new ordinary shares in IHH (“IHH that the total value of the Actual Number may exceed the Shares”) to the Directors of the Company i.e. Dr Tan Base Allocation based on the Issue Price. See Leng and Mehmet Ali Aydinlar (“Proposed Allocation”) The total number of IHH Shares which may be issued under The proposed Ordinary Resolutions 10 – 11 are for the this LTIP shall not exceed two percent (2%) of the total purpose of approving the allocation of LTIP units and the number of issued shares of our Company at any time during corresponding number of new IHH Shares to the Directors the existence of the LTIP. Also, the total number of IHH of the Company i.e. Dr Tan See Leng and Mehmet Ali Shares which may be issued under LTIP units granted Aydinlar under the LTIP as established by our Company. under this LTIP to a participant who either singly or collectively with persons connected with him owns twenty Rationale of the Proposed Allocation percent (20%) or more of the total number of issued shares The purpose of the LTIP is to promote ownership of IHH of the Company shall not exceed in aggregate ten percent Shares by eligible employees of our Group including the (10%) of the total number of IHH Shares to be issued under Executive Directors, thereby motivating eligible employees the LTIP. including the Executive Directors to work towards achieving All LTIP units that have been vested must be surrendered our business goals and objectives and to enable us to to the Company and the Company shall allot and issue to attract, retain and reward eligible employees of our Group the eligible employee such number of IHH Shares on the by permitting them to participate in our Company’s growth. basis of one (1) IHH Share for each LTIP unit. There is no The LTIP units are granted to eligible employees including price payable by the eligible employees or Directors for the Executive Directors as part of the annual compensation allotment and issuance of new IHH Shares to them upon package and upon the meeting of performance targets surrender of the LTIP units. No shares will be allotted and based upon, among others, the Balanced Scorecard and issued upon the surrender of LTIP units if such allotment individual annual performance appraisal. The Proposed and issuance would violate any provision of applicable Allocation is part of the compensation package to the laws, nor shall any LTIP units be exercisable more than ten Executive Directors. (10) years, from the date on which the LTIP becomes effective. No LTIP unit shall be granted pursuant to the LTIP on or after the tenth anniversary of the date on which the LTIP becomes effective.

313 Additional Corporate Information NOTICE OF ANNUAL GENERAL MEETING

Unit Price, Ranking and Listing 3. Proposed renewal of authority for IHH to purchase its own The IHH Shares to be issued to the Directors upon the shares of up to ten percent (10%) of the prevailing total surrender of all granted and vested LTIP units shall be number of issued shares of the Company based on the five (5)-day weighted average market price of The proposed Ordinary Resolution 12, if passed, will enable IHH Shares at the time the LTIP unit is issued. The new IHH the Company to purchase its own shares through Bursa Shares to be issued pursuant to the Proposed Allocation Securities of up to ten percent (10%) of the prevailing total shall, upon allotment and issue, rank equally in all respects number of issued shares of the Company. This authority with the existing IHH Shares save that they shall not be will, unless revoked or varied at a general meeting, expire entitled to any rights, allotments, entitlements, dividends at the conclusion of the next AGM of the Company. and/or distributions, the entitlement date of which is prior to the date of allotment of such new IHH Shares to be issued. Further information on the Proposed Renewal of Share The new IHH Shares to be issued pursuant to the Proposed Buy-Back Authority is set out in the Circular to shareholders Allocation shall be primarily listed on the Main Market of dated 29 April 2019, which is despatched together with the Bursa Securities and secondarily listed on the Main Board Company’s Annual Report 2018. of Singapore Exchange Securities Trading Limited, subject to obtaining the necessary approvals. 4. Proposed adoption of a new Constitution of the Company in place of the existing Constitution (“Proposed New Directors’ and Major Shareholders’ Interests Constitution”) Each of Dr Tan See Leng and Mehmet Ali Aydinlar is deemed interested in the Proposed Allocation to him The proposed Special Resolution 1, if passed, will streamline individually. Mehmet Ali Aydinlar was an Executive Director the Company’s Constitution with the provisions of the of the Company during the financial year 2018 and Companies Act 2016, the Main Market Listing Requirements was subsequently re-designated as Non-Independent of Bursa Malaysia Securities Berhad, the Malaysian Code Non-Executive Director of the Company with effect from on Corporate Governance issued by the Securities 1 March 2019 following his cessation as the Chief Executive Commission Malaysia and any other relevant regulations. Officer of ASYH on the same day. In view that the proposed amendments to be made in Accordingly, each of Dr Tan See Leng and Mehmet Ali the Company’s existing Constitution are substantial, Aydinlar has abstained and will continue to abstain from all the Board proposes that the Proposed New Constitution be deliberations and voting on the Proposed Allocation to him adopted in its entirety in place of the Company’s existing individually at the relevant Board meetings of IHH and/or its Constitution. The Proposed New Constitution shall take subsidiary. In addition, each of Dr Tan See Leng and effect once it has been passed by a majority of not less than Mehmet Ali Aydinlar will abstain and has undertaken to seventy-five percent (75%) of such members who are ensure that persons connected to him will abstain from entitled to vote and do vote in person or by proxy at the voting in respect of their respective direct and/or indirect Ninth Annual General Meeting of the Company. shareholding in IHH, if any, on the resolutions pertaining to Further information on the Proposed New Constitution is the Proposed Allocation to him individually at the AGM to set out in the Circular to shareholders dated 29 April 2019, be convened. which is despatched together with the Company’s Annual Save as disclosed above, none of the directors, major Report 2018. shareholders and persons connected to the directors and major shareholders of IHH are interested in the Proposed Allocation.

314 IHH Healthcare Berhad | Annual Report 2018 FORM OF PROXY Ninth Annual General Meeting

*I/*We (Full name and NRIC/Passport/Company no. in capital letters) of (Full address in capital letters and telephone no.) being a member/members of IHH HEALTHCARE BERHAD (“Company”), hereby appoint:

Proportion of Shareholding NRIC/ Full Name Full Address Passport No. No. of Shares %

*and/*or

Proportion of Shareholding NRIC/ Full Name Full Address Passport No. No. of Shares %

*and/*or (only in the case of a substantial shareholder) Proportion of Shareholding NRIC/ Full Name Full Address Passport No. No. of Shares %

*and/*or (only in the case of a substantial shareholder) Proportion of Shareholding NRIC/ Full Name Full Address Passport No. No. of Shares % or failing *him/*her/*them, the CHAIRMAN OF THE MEETING as *my/*our *proxy/*proxies to vote for *me/*us on *my/*our behalf at the Ninth Annual General Meeting of the Company to be held at Ballroom A & B, Level 6, Hilton Hotel KL Sentral, 3 Jalan Stesen Sentral, 50470 Kuala Lumpur, Wilayah Persekutuan, Malaysia on Tuesday, 28 May 2019 at 10.00 a.m. and at any adjournment thereof. *I/*We indicate with an “✓” or “x” in the spaces below how *I/*we wish *my/*our vote to be cast: No. Resolutions For Against Ordinary Resolutions 1 Payment of a first and final single tier cash dividend of 3 sen per ordinary share 2 Re-election of Dato’ Mohammed Azlan bin Hashim 3 Re-election of Bhagat Chintamani Aniruddha 4 Re-election of Koji Nagatomi 5 Re-election of Takeshi Saito 6 Approval of payment of Directors’ fees and other benefits to the Directors of the Company by the Company 7 Approval of payment of Directors’ fees and other benefits to the Directors of the Company by the Company’s subsidiaries 8 Re-appointment of KPMG PLT as Auditors of the Company and authority to the Directors to fix their remuneration 9 Authority to allot shares pursuant to Section 75 of the Companies Act 2016 10 Allocation of units under the Long Term Incentive Plan of the IHH Group and issuance of new ordinary shares in IHH to Dr Tan See Leng 1 1 Allocation of units under the Long Term Incentive Plan of the IHH Group and issuance of new ordinary shares in IHH to Mehmet Ali Aydinlar 12 Proposed renewal of authority for IHH to purchase its own shares of up to ten percent (10%) of the prevailing total number of issued shares of IHH Special Resolution 1 Proposed adoption of a new Constitution of the Company in place of the existing Constitution Subject to the abovestated voting instructions, *my/*our *proxy/*proxies may vote or abstain from voting on any resolutions as *he/*she/*they may think fit. Dated this day of 2019

Total no. of Shares held Securities Account No. Signature of member/Common Seal of member 3rd fold here

IMPORTANT: PLEASE READ THE NOTES BELOW 5. A corporation which is a member, may by resolution of its Directors or other governing body authorise such person as it thinks fit to act as its representative at the Meeting, in accordance Notes: with the Company’s Constitution. * Delete whichever is not applicable. 6. The instrument appointing the proxy together with the Authorisation Document or the duly 1. A member entitled to attend and vote at the above Meeting is entitled to appoint a proxy or registered Power of Attorney referred to in Note 4 above, if any, must be deposited at the proxies to exercise all or any of his rights to attend, participate, speak and vote in his/her office of the Share Registrar, Boardroom Share Registrars Sdn Bhd (formerly known as stead. Symphony Share Registrars Sdn Bhd) at Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia not less than forty-eight 2. Where a member of the Company is an exempt authorised nominee which holds shares in the (48) hours before the time appointed for holding of the Meeting or at any adjournment thereof. Company for multiple beneficial owners in one securities account (“omnibus account”) as defined under the Securities Industry (Central Depositories) Act, 1991, there is no limit to the 7. By submitting an instrument appointing a proxy(ies) and/or representative(s) to attend, speak number of proxies which the exempt authorised nominee may appoint in respect of each and vote at the above Meeting and/or any adjournment thereof, a member of the Company (i) omnibus account it holds. consents to the collection, use and disclosure of the member’s personal data by the Company (or its agents) for the purpose of the processing and administration by the Company (or its 3. A member other than an exempt authorised nominee shall be entitled to appoint not more agents) of proxies and representatives appointed for the above Meeting (including any than two (2) proxies to attend and vote at the same meeting. Notwithstanding the foregoing, adjournment thereof) and the preparation and compilation of the attendance lists, minutes any member other than an exempt authorised nominee who is also a substantial shareholder and other documents relating to the above Meeting (including any adjournment thereof), and (within the meaning of the Companies Act 2016) shall be entitled to appoint up to (but not in order for the Company (or its agents) to comply with any applicable laws, listing rules, more than) five (5) proxies. Where such member appoints more than one (1) proxy, the regulations and/or guidelines (collectively, the “Purposes”), (ii) warrants that where the appointment shall be invalid unless the percentage of the shareholding to be represented by member discloses the personal data of the member’s proxy(ies) and/or representative(s) to each proxy is specified. the Company (or its agents), the member has obtained the prior consent of such proxy(ies) 4. The instrument appointing a proxy shall: and/or representative(s) for the collection, use and disclosure by the Company (or its agents) of the personal data of such proxy(ies) and/or representative(s) for the Purposes, and (iii) (i) in the case of an individual, be signed by the appointer or by his/her attorney. agrees that the member will indemnify the Company in respect of any penalties, liabilities, (ii) in the case of corporation, be either under its common seal or signed by its attorney or an claims, demands, losses and damages as a result of the member’s breach of warranty. officer on behalf of the corporation. 8. Only Members whose names appear in the General Meeting Record of Depositors on 21 May A copy of the Authorisation Document or the duly registered Power of Attorney, which should 2019 shall be entitled to attend, speak and vote at this Ninth Annual General Meeting of the be valid in accordance with the laws of the jurisdiction in which it was created and exercised, Company or appoint a proxy(ies) on his/her behalf. should be enclosed with the proxy form.

2nd fold here

Affix Stamp here

IHH HEALTHCARE BERHAD (901914-V) c/o Boardroom Share Registrars Sdn Bhd (formerly known as Symphony Share Registrars Sdn Bhd) Level 6 Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia

1st fold here

316 IHH Healthcare Berhad | Annual Report 2018 CORPORATE INFORMATION

BOARD OF DIRECTORS Dato’ Mohammed Azlan bin Hashim Koji Nagatomi Jill Margaret Watts Chairman, Independent, Non-Executive Non-Independent, Non-Executive Independent, Non-Executive Dr Tan See Leng Takeshi Saito Quek Pei Lynn Managing Director and Non-Independent, Non-Executive Non-Independent, Non-Executive Chief Executive Officer, (Alternate Director to Chintamani Aniruddha Chang See Hiang Non-Independent, Executive Bhagat) Senior Independent, Non-Executive Mehmet Ali Aydinlar Tomo Nagahiro Rossana Annizah binti Ahmad Rashid Non-Independent, Non-Executive Non-Independent, Non-Executive Independent, Non-Executive (Alternate Director to Koji Nagatomi) Chintamani Aniruddha Bhagat Shirish Moreshwar Apte Non-Independent, Non-Executive Independent, Non-Executive

COMPANY SECRETARY REGISTERED ADDRESS & AUDITORS Seow Ching Voon BUSINESS ADDRESS KPMG PLT (MAICSA 7045152) Level 11 Block A Chartered Accountants Pantai Hospital Kuala Lumpur Level 10, KPMG Tower COMMITTEES 8 Jalan Bukit Pantai 8, First Avenue Audit Committee 59100 Kuala Lumpur Bandar Utama Wilayah Persekutuan, Malaysia 47800 Petaling Jaya Chairman : Rossana Annizah binti Selangor Darul Ehsan, Malaysia Ahmad Rashid Tel : +603-2298 9898 Tel : +603-7721 3388 Members : Chang See Hiang Fax : +603-2298 9899 : Shirish Moreshwar Apte Fax : +603-7721 3399 : Jill Margaret Watts COMPANY WEBSITE www.ihhhealthcare.com PRINCIPAL BANKERS Risk Management Committee • Bank of America Merrill Lynch Chairman : Rossana Annizah binti SHARE REGISTRARS • Bank of China (Hong Kong) Limited Ahmad Rashid Malaysia • BNP Paribas Members : Chang See Hiang Boardroom Share Registrars Sdn Bhd • Credit Agricole Corporate and Investment : Shirish Moreshwar Apte (formerly known as Symphony Share Bank : Jill Margaret Watts Registrars Sdn Bhd) • DBS Bank Ltd Level 6, Symphony House Nomination Committee Pusat Dagangan Dana 1 • Hongkong and Shanghai Banking Chairman : Shirish Moreshwar Apte Jalan PJU 1A/46 Corporation Limited Members : Chang See Hiang 47301 Petaling Jaya • ING Bank : Rossana Annizah binti Selangor Darul Ehsan, Malaysia • MUFG Bank, Ltd Ahmad Rashid Tel : +603-7849 0777 (helpdesk) • Oversea-Chinese Banking Corporation : Chintamani Aniruddha Bhagat Fax : +603-7841 8151 / 8152 Limited Email : [email protected] Remuneration Committee • Türkiye Garanti Bankasi A.S. • United Overseas Bank Limited Chairman : Shirish Moreshwar Apte Singapore Members : Chang See Hiang Boardroom Corporate & Advisory STOCK EXCHANGE LISTING : Rossana Annizah binti Services Pte Ltd Main Market of Bursa Malaysia Ahmad Rashid 50 Raffles Place #32-01 Securities Berhad : Chintamani Aniruddha Bhagat Singapore Land Tower Singapore 048623 (Listed since 25 July 2012) Steering Committee Tel : +65-6536 5355 Main Board of the Singapore Exchange Securities Trading Limited Chairman : Dato’ Mohammed Azlan bin Fax : +65-6438 8710 (Listed since 25 July 2012) Hashim Members : Dr Tan See Leng : Chintamani Aniruddha Bhagat : Takeshi Saito : Quek Pei Lynn (Alternate to Chintamani Aniruddha Bhagat) IHH HEALTHCARE BERHAD (901914-V) Level 11 Block A, Pantai Hospital Kuala Lumpur, 8 Jalan Bukit Pantai, 59100 Kuala Lumpur, Malaysia

Tel: 603-2298 9898 www.ihhhealthcare.com

All rights reserved. No information contained in this report should be reproduced without the express written permission of IHH Healthcare Berhad. This report contains forward-looking statements. All statements, other than statements of historical facts included in this report, including, without limitation, those regarding our financial position, business strategies, plans and objectives for future operations, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements, or industry results expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future. Such forward-looking statements reflect our current view with respect to future events and do not guarantee future performance. We expressly disclaim any obligation or undertaking to release publicly any update or revision to any forward-looking statement contained in this report to reflect any change in our expectations with regard to such statement or any change in events, conditions or circumstances on which any such statement is based.